The Race to Bring Green Steel to Market: A Global Perspective
The world is witnessing a significant shift towards renewable energy sources, with many countries aiming to reduce their carbon footprint. However, the steel industry, a major contributor to global emissions, remains a challenging sector to decarbonize. While some companies have made strides in producing cleaner steel, the journey towards green steel production is fraught with obstacles and setbacks.
The Steel Production Process and Its Environmental Impact
Steel production is a complex process that involves adding alloys to molten iron and carbon, removing impurities, and adjusting the chemical composition. Traditionally, coal-based blast furnaces have been used to produce iron, contributing to high environmental costs. The production of iron and steel accounts for approximately 11% of global carbon emissions, prompting producers to seek cleaner alternatives.
The Battle for Green Steel in the United States
In the United States, two companies, SSAB and Cleveland-Cliffs, were initially on track to launch green steel operations under the Biden administration. Federal funding of $1 billion was allocated to support low-carbon steel production. Additionally, the Swedish firm SAAB planned to produce iron using green hydrogen in its Mississippi facility. However, the project faced a setback when its hydrogen supplier, Hy Stor Energy, canceled a deal to provide the necessary green hydrogen.
This cancellation led to delays in Cleveland-Cliffs' plans for a hydrogen ironmaking facility in Ohio. It appears that both companies have decided to continue using fossil fuels for steel production, citing the collapse of the U.S. green hydrogen industry and the lack of government support as key factors. As a result, the U.S. currently has no domestic green steel project pipeline for the 2020s, making green steel production seem financially unfeasible in the near future.
The European Union's Carbon Border Adjustment Mechanism (CBAM)
In Europe, the outlook is slightly more promising. The European Union's CBAM, implemented in early 2026, is the world's first policy of its kind. It imposes fees on imports of steel, aluminum, and other industrial products based on the cleanliness of their production processes. This move is expected to encourage European manufacturing companies to invest in decarbonization activities.
Global Trends in Steel Production
Globally, the steel industry is gradually shifting away from coal blast furnaces. Approximately 10% of iron is now produced using gas to convert iron ore to direct reduced iron. Additionally, basic oxygen furnaces are being replaced with lower-emission electric arc furnaces (EAFs), which currently contribute around 31% of steel production, according to Global Energy Monitor. EAFs also produce steel using scrap, reducing emissions by two-thirds and eliminating many atmospheric pollutants.
The Role of Technology and Research
While the transition to green steel production is challenging, technological advancements and increased research and development can play a crucial role. Companies investing in new steel-recycling mills and innovative technologies are making progress. However, the high costs associated with decarbonizing operations have led some major producers to extend their climate pledges. Greater investment in research and development, coupled with supportive policies and carbon taxes on construction materials, could accelerate the transition to green steel production.
The Way Forward
The steel industry's journey towards decarbonization is complex and fraught with challenges. While some companies have made progress, the lack of government support and the high costs associated with green steel production have hindered progress. However, with increasing demand for cleaner construction materials and supportive policies like the EU's CBAM, the steel industry is gradually moving towards a more sustainable future. The key to success lies in continued investment in research and development, as well as collaboration between governments, businesses, and technology providers.
