Green steel tests the economics of industrial transformation
Published on 22 September 2026 at 03:38 GMT
By Editorial Team SDG9
Steel holds up buildings, carries trains and forms the machinery of modern economies. Changing how it is made reaches far beyond the factory gate. Green steel technologies offer ways to reduce the industry's dependence on coal, but their expansion turns a materials problem into a question about electricity, finance and who pays for industrial change.
Replacing coal in the chemistry
Steelmaking releases carbon dioxide through fuel use and chemical reactions. In conventional blast furnaces, coke made from coal helps remove oxygen from iron ore. Replacing the heat source alone does not eliminate that chemical dependence on carbon.
The International Energy Agency (IEA) put iron and steel's direct emissions at approximately 7% of global energy-system carbon dioxide emissions in its 2020 technology roadmap, using 2019 data. That denominator includes industrial process emissions; it is not a share of all greenhouse gases. The agency's 2025 assessment still described total steel emissions as largely unchanged in recent years.
Hydrogen-based steelmaking changes the reduction step. Hydrogen removes oxygen from ore, producing water rather than carbon dioxide in that reaction. The resulting solid iron, often called sponge iron, is melted in an electric arc furnace. Producing hydrogen by splitting water with electricity, and powering the furnace, makes the electricity supply part of the emissions calculation. An electric furnace alone does not establish that the complete production chain is low-carbon.
Recycled scrap avoids repeating the extraction of iron from ore. It can be remelted in electric furnaces, substantially reducing energy consumption. Available scrap reflects past production and product retirements, so recycling cannot supply all demand. Ore-based production and recycling address different parts of the transition.
What the pioneering plants demonstrate
Sweden's HYBRIT, developed by SSAB, LKAB and Vattenfall, reported in August 2024 that its Luleå pilot had produced more than 5,000 tonnes of hydrogen-reduced iron. Its research covered hydrogen production, ore reduction and melting into steel. These are pilot results, distinct from sustained commercial output at the scale of an established steelworks.
The project's emissions wording also illustrates the importance of measurement boundaries. HYBRIT reported less than 0.05 tonnes of carbon dioxide equivalent per tonne of steel for direct operations and purchased energy, rounded to 0.0 in its presentation. Small emissions remained from electrodes and other furnace inputs. The result does not mean that every activity across the product's entire life cycle had zero emissions.
At Boden, Stegra is attempting the transition to large-scale production. On 24 June 2026, the company announced completion of a €1.4 billion financing round, with support from existing investors and lenders. It said construction activity was being increased and the project timetable was under review. That announcement documents financing and construction progress, rather than proving that commercial steel deliveries had begun.
The company also reported support from the Swedish Energy Agency and the EU Innovation Fund. Its mix of private finance, lending and public backing shows how the first commercial projects can involve several kinds of capital. Completion of a funding round and completion of a working plant remain separate milestones, each with different evidence behind it.
Electricity and the price premium
Cheap renewable generation can improve hydrogen's economics, but a steelworks also depends on access to the network. The European Commission warned in its March 2025 steel and metals action plan that grid connection waits could extend for years and derail electrification investments. A factory investment and an electricity connection therefore have interdependent schedules.
Hydrogen storage offers one way to separate the timing of electricity consumption from iron production. HYBRIT reported successful electrolyser operation and tests using stored hydrogen against electricity-market conditions. Storage therefore becomes another component of the factory system.
The IEA estimated in 2025 that early commercial production using fully hydrogen-based direct reduction with low-emissions hydrogen and electric furnaces could cost 50–140% more than the conventional blast furnace and basic oxygen furnace route, depending on region. This was a modelled production-cost comparison using 2024 energy inputs and prices, excluding explicit carbon pricing and subsidies. It did not account for regional differences in capital or non-energy operating costs and was not a market quotation for green steel.
Creating a market without exporting the problem
Demand is another constraint. The IEA reported that buyer commitments had not yet stimulated production growth at the pace and scale envisaged for the transition. It identified firm purchase agreements as a way to give suppliers greater certainty when taking investment decisions. A public expression of interest offers a different level of assurance from a contract specifying quantities, delivery dates and payment terms.
Public procurement connects this issue to bridges, railways and other infrastructure. A purchasing authority can assess the emissions embodied in steel alongside the price of the material. In practical terms, that raises questions about which emissions are counted, what documentation is accepted and how bids using different production routes are compared. The purchase concerns both a physical product and a verifiable account of its manufacture.
The European Commission proposed using sustainability and resilience criteria to create demand for cleaner industrial products in its 2025 action plan. It also acknowledged risks to exporters and manufacturers further down the supply chain when carbon costs differ across borders. These were policy proposals and identified risks, not evidence that competitiveness had already been protected.
For governments, the unresolved choice is how to distribute the costs of transformation between producers, buyers and public budgets. How much additional spending would procurement criteria entail? Would support produce new low-emissions capacity or primarily change which customers receive existing output? Would higher material costs make domestic manufacturers less competitive against imported finished goods?
The issue connects directly to SDG 9 (Industry, Innovation and Infrastructure): replacing production equipment and its supporting energy systems changes how industrial development is delivered. Pilot plants have supplied evidence about the technology. Financing rounds and purchasing arrangements address its commercial conditions. Whether those elements can expand together, across different electricity markets and trading environments, remains the larger test for green steel.
Written by a human author, edited with AI assistance.
Further information:
International Energy Agency, Iron and Steel Technology Roadmap, provides the historical emissions baseline and explains coal use, recycling and alternative production routes.
International Energy Agency, Breakthrough Agenda Report 2025, steel chapter, supports the cost comparison, its assumptions and the assessment of demand commitments.
HYBRIT, research results published on 27 August 2024, documents pilot production, emissions boundaries and hydrogen-system tests.
Stegra, financing announcement of 24 June 2026, confirms the funding round and describes construction, timetable review and public support.
European Commission, A European Steel and Metals Action Plan, 19 March 2025, sets out grid constraints, procurement proposals and competitiveness risks.
