Carbon neutral merchant pig iron in Brazil: Alternatives that allow decoupling from deforestation

•Merchant pig iron (MPI) making emits more GHG if based on deforestation than on coal.•The GHG neutrality forest plantations can provide to Brazilian MPI has a high cost.•Pyrolysis optimization significantly reduces this cost by economizing timber.•Brazil should commit to supply attested carbon-neutral MPI.•Importers should commit to pay a premium of US$3 per ton of avoided emissions.

Brazilian merchant pig iron (MPI) mills, even those relying exclusively on charcoal, are at least as harmful to the global climate as the coal-based competitors they confront in international trade. However, when timber from deforestation is replaced by sustainably managed forest plantations, a carbon neutral process emerges. Yet the cost of growing trees can be large enough to discourage mills from pursuing such a climate change mitigation route. The paper shows that the impasse can be overcome by the improvement of pyrolysis kilns coupled with a multilateral agreement in which (1) Brazil supplies attested carbon-neutral MPI and (2) importers of Brazilian MPI take environmental concerns to the field of MPI trade, paying a premium of 19% of MPI price or of US$3 per ton of avoided emissions.