Recycling steel could provide a much-needed lifeline for the UK’s troubled steel industry, a new study has found, and have the added benefit of reducing greenhouse gas emissions.

Two-thirds of the steel currently used is made from primary production, and most of the remainder comes from off-cuts of the steel-making process, rather than recycled goods. The UK does not currently use all the scrap steel produced in the country, but global stocks of recyclable steel are expected to rise sharply in the coming decades.

A new report predicts that the potential for recycling steel is such that the need for primary production could diminish to near zero in the next 30 years. That would save vast quantities of carbon, in part because electric arc furnaces – used for recycling steel – are much more energy efficient than blast furnaces, which produce new steel from iron ore.

Prof Julian Allwood, professor of engineering and the environment at the University of Cambridge, and author of the report, said: “We must move our UK steel-making industry away from primary production towards recycled steel, made with sustainable power.

“This green steel model is the only future compatible with our goals for zero emissions. The UK, with its strong climate policy, mature stocks of steel, and great history of innovation in materials science and processing, is perfectly placed to be world-leading with a sustainable steel industry.”

Steel goods last an average of 35 to 40 years before they are scrapped, and the UK generates about 10m tonnes of scrap a year. Currently, about 80% of this is exported for processing to other countries, chiefly Turkey and China. The US, by contrast, meets about half of its demand for steel by recycling.

Steel production in the UK is about 7m tonnes a year, or less than half of current demand. Recycling steel could make the UK self-sufficient in steel, as well as providing a new industry, the report says.

It also calls for an export tariff on scrap steel to encourage the recycling of steel within the UK, as well as better waste management which would allow for improved collection rates and the separation and recycling of steel scrap products. Government support is likely to be needed, but the regenerated steel industry would soon pay for itself, the report found.

The steel industry is responsible for about 5% of greenhouse gas emissions globally, making it one of the highest-emitting industrial sectors, alongside concrete. In the UK, emissions from steel were about 17m tonnes of carbon dioxide in 2012, the most recent year for which figures are available in the report. If steel imports were included, that figure would rise to about 26m tonnes of carbon dioxide.

Those emissions could be reduced by about three-quarters by employing recycling technology, the report found, but the way in which the government accounts for carbon emissions currently means recyclers are penalised compared with primary steel producers.

The report also calls for more research and development into steel recycling and scrap metal, which could help to ensure the metals are turned into high-value components rather than simply melted down into cheap ingots for export. Impurities in recycled steel can prevent this, but better manufacturing and recycling methods would allow for impurities to be removed, and the resulting steel put to higher-value uses.

Allwood said such a restructuring would create long-term green jobs and lead to exportable skills and technology, as well as creating a new value for products that are currently undervalued or unvalued.

“We can do this with less than half the emissions of making steel with iron ore, and with more renewable energy this could drop much further. This will not happen overnight, but the process has already begun. With private investment and government support, our steel-making industry can once again lead the world and thrive.”