Steel industry shifts from coal to hydrogen in pursuit of zero-carbon production
Steel producers are accelerating the shift from coal-based manufacturing to hydrogen and renewable energy to bring emissions near zero, driven by carbon policies and demand from major buyer sectors.
At a glance
- The steel industry is accelerating a move away from coal-based manufacturing toward hydrogen and renewable-energy-powered models intended to bring emissions close to zero.
- DRI technology reduces iron ore in a gas-based environment to produce sponge iron, which is then melted in electric arc furnaces to make steel.
- EU carbon-border policy and demand from automotive, white-goods and energy sectors are encouraging producers to adopt lower-emission steelmaking methods.
The global steel industry, responsible for some of the highest carbon dioxide emissions per ton of output, stands at the centre of the climate agenda. Producers are now accelerating a shift away from coal-based manufacturing toward models powered by hydrogen and renewable energy. Known as “green steel,” this approach aims to bring carbon emissions down to near-zero levels.
In conventional blast furnace steelmaking, iron ore is reduced using coking coal, releasing vast quantities of CO₂. Green steel production replaces coal with hydrogen. Because hydrogen-based reduction generates water vapour rather than carbon dioxide, the method offers a clear environmental advantage.
Direct Reduced Iron (DRI) technology forms the technical backbone of this transition. In the DRI process, iron ore is reduced in a gas-based environment to produce sponge iron, which is then melted in electric arc furnaces to yield steel. When the electricity powering those furnaces comes from renewable sources, the carbon footprint of the entire production chain drops dramatically.
Scrap steel recycling is another essential component. Electric arc furnaces can remelt scrap steel and feed it back into the production cycle, cutting both energy consumption and the demand for raw materials.
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The push toward green steel extends beyond environmental concerns. Trade policies such as the European Union's Carbon Border Adjustment Mechanism are compelling producers to adopt low-emission methods. Major buyer sectors — automotive, white goods and energy — are increasingly sourcing green steel to reduce the carbon intensity of their supply chains.
Analysts expect competition in the steel sector to pivot from production capacity to carbon performance in the coming years. Energy costs, carbon taxes and sustainability standards are fundamentally reshaping how steel is made. Countries and producers that embrace this shift early will gain a commercial edge while making a tangible contribution to global climate targets.