What is green steel? Production methods, technologies, and the future of the sector in 2026

The steel sector is responsible for 7 to 9 percent of global carbon dioxide emissions. Approximately 3.7 billion tonnes of CO₂ are released into the atmosphere each year — a figure several times greater than the aviation industry's total emissions. Every tonne of crude steel produced in conventional blast furnaces brings roughly 2 tonnes of carbon dioxide with it. Green steel is the name given to the production approach developed to change precisely this equation.

What does green steel mean?

Green steel is steel produced with near-zero carbon emissions by using green hydrogen and renewable energy sources instead of fossil fuels such as coal and natural gas. In conventional steelmaking, coking coal is used to remove oxygen from iron ore; the by-product of this chemical reaction is carbon dioxide. In green steel, hydrogen takes over the same function. When hydrogen combines with the oxygen in iron ore, it produces water vapour rather than CO₂.

This difference may seem small, but its implications are enormous. According to World Steel Association data, global crude steel production exceeds 1.8 billion tonnes per year. Eliminating the carbon burden of each tonne is one of the most impactful industrial steps that can be taken against the climate crisis.

How does conventional steel production work?

Today, approximately 70 percent of global steel production is carried out using the blast furnace–basic oxygen furnace (BF-BOF) method. In this process, iron ore is fed into the blast furnace together with coking coal. The coal serves both as fuel and as the reducing agent that removes oxygen from the ore. The resulting liquid pig iron is converted into steel in the basic oxygen furnace. Intense quantities of CO₂ are released at every stage — an average of 1.99 tonnes of carbon dioxide per tonne.

The remaining 30 percent is largely produced by melting scrap steel in electric arc furnaces (EAF). This method results in far fewer carbon emissions than the blast furnace — approximately 0.35 tonnes of CO₂ per tonne. Türkiye's steel sector relies predominantly on this second method, giving the country a relative advantage in the green transition.

Green steel production methods

Green steel is not a single technology. Several interconnected production routes aim to reduce carbon emissions. Each differs in maturity level, cost structure, and emission reduction capacity.

Hydrogen-based direct reduction (H2-DRI) and electric arc furnace (EAF)

This is the first and most promising route that comes to mind when green steel is mentioned. The process consists of three fundamental steps. In the first stage, water molecules are split in electrolysis plants powered by renewable energy to produce green hydrogen. In the second stage, this hydrogen is sent to a direct reduction furnace. Inside the furnace, hydrogen removes oxygen from the iron ore and transforms into water vapour; what remains is metallic iron known as "sponge iron." In the third stage, sponge iron is melted in an electric arc furnace and converted into steel.

The greatest advantage of this route is its emission reduction potential. When operating entirely on green hydrogen and renewable electricity, it can reduce carbon emissions by 90 to 97 percent compared to conventional production. The only by-product is water vapour.

Natural gas-based DRI + EAF

Since a full transition to green hydrogen is expensive and requires infrastructure, many producers opt for natural gas-powered DRI plants as an interim solution. This method reduces carbon emissions by approximately 50 percent compared to the conventional blast furnace. Plants can be designed to gradually transition to green hydrogen once the infrastructure is ready.

Scrap-based EAF production

Currently the most widespread low-carbon steelmaking method. Scrap steel is melted in electric arc furnaces and reused. It entirely bypasses the reduction stage — the dirtiest part of making steel from iron ore. It achieves 75 percent lower emissions than conventional production. However, it is not sufficient on its own: scrap steel can meet at most one-third of global steel demand. Primary iron production — making steel from ore — remains necessary for the remaining two-thirds.

Carbon capture and storage (CCS/CCU)

A method that captures CO₂ generated during production in existing blast furnaces and either stores it underground or converts it into industrial raw material. In theory, it promises 60–70 percent emission reduction. In practice, however, it is still at a very early stage. According to International Energy Agency (IEA) estimates, only about 1 percent of annual CO₂ emissions from the steel sector will be captured by this method by 2030.

Molten oxide electrolysis (MOE)

Still in the experimental stage, this technology reduces iron ore directly using electric current. The output is oxygen, not CO₂. US-based Boston Metal has commissioned a reactor in Massachusetts to scale this technology to industrial level. Commercial production is still years away, but the emission potential is near zero.

Biochar usage

A method that uses biomass-derived coal instead of coal in blast furnaces. It can reduce emissions by up to 40 percent, but its application remains limited because the potassium and phosphorus content in biochar can adversely affect steel quality.

Comparison of green steel technologies

Seeing the emission reduction capacities and maturity levels of different production routes side by side is useful for understanding where the sector is heading:

Scrap-based EAF production achieves 75 percent emission reduction and is already in widespread commercial use. Natural gas DRI + EAF provides around 50 percent reduction and is in commercial use. Green hydrogen DRI + EAF has a 90–97 percent reduction potential; it is transitioning from pilot production to commercialisation. CCS/CCU promises 60–70 percent reduction but is at an early development stage. MOE (molten oxide electrolysis) has the potential to produce with near-zero emissions but is still experimental. Biochar provides up to 40 percent reduction and is in limited application.

Green hydrogen: the fuel of green steel

The most determining input for green steel production is green hydrogen. So what distinguishes green hydrogen from other types of hydrogen?

Hydrogen is classified by colour codes according to its production method. Hydrogen produced from natural gas with CO₂ released into the atmosphere is called "grey"; when the carbon generated during production is captured and stored, it becomes "blue." Hydrogen produced from coal is called "brown." Green hydrogen is obtained exclusively in electrolysis plants powered by renewable energy — wind, solar, or hydroelectric — by splitting water into hydrogen and oxygen. Direct CO₂ emissions during production are zero.

The role of green hydrogen in the steel sector is simple but transformative: it decarbonises the reduction process by replacing coal in blast furnaces. However, scaling up is not easy. Fully transitioning global steel production to green hydrogen would require approximately 8,000 TWh of energy annually — a figure that exceeds the total electricity production of many countries.

Green steel in 2026: the global map

2026 is a turning point for the green steel sector. However, the map does not show unidirectional progress as expectations might suggest. A sharp divergence is occurring between East and West.

China: rising to the leading position in production

Baowu Steel brought the world's first million-tonne hydrogen-based steel production line to full capacity on 23 December 2025 in the city of Zhanjiang, Guangdong province. The facility processes sponge iron produced in a hydrogen-based shaft furnace through high-efficiency green electric furnaces, producing 1 million tonnes of near-zero carbon steel annually. Reducing carbon emissions by 50 to 80 percent compared to the conventional blast furnace method, the facility prevents 3.46 million tonnes of CO₂ emissions per year — equivalent to the carbon absorbed by approximately 2,000 square kilometres of forest.

Across China, 25 green hydrogen projects are underway; the total targeted capacity is 500,000 tonnes of green hydrogen per year. Over the past five years, green hydrogen production costs have fallen by 40 percent. A Baowu subsidiary launched the first green hydrogen plant in China connected directly to an offshore wind farm; the hydrogen produced will be transported by pipeline to the Zhanjiang steel facility.

Europe: funding crisis and delays

The continent's flagship project Stegra — the Sweden-based venture formerly known as H2 Green Steel — is going through difficult times. The facility near the Arctic Circle is 60 percent complete, but cost overruns and delays have pushed the funding gap to €1.5 billion. Citigroup moved the company to its "distressed credit" unit. The Swedish Energy Agency rejected a previously approved €165 million grant and demanded proof of full financing by spring 2026.

Stegra is not alone. ArcelorMittal indefinitely postponed its hydrogen-based DRI plant in Gijón, Spain, citing adverse market conditions, high energy costs, and slower-than-expected development of green hydrogen infrastructure. In Germany, Thyssenkrupp suspended its green hydrogen transition at the Duisburg facility — stating that hydrogen prices were much higher than expected.

USA: stepping back

Sweden's SSAB withdrew from negotiations with the US Department of Energy over a $500 million green steel allocation. The company's hydrogen-based iron production project in Mississippi was shelved following the collapse of hydrogen supplier Hy Stor Energy. SSAB announced it has no plans to revive hydrogen-based projects in the US. Cleveland-Cliffs suspended its hydrogen-compatible facility in Ohio and began working on a fossil fuel-compatible redesign. As of 2026, no major green hydrogen initiative is planned by US steelmakers to launch within this decade.

Middle East and new players

The Gulf region is a candidate to become a new green steel hub with its cheap solar energy and green hydrogen production potential. Meranti Green Steel signed a green hydrogen supply agreement for a 2.5 million tonne per year DRI/HBI facility in the Duqm region of Oman. Brazilian mining giant Vale and its partners are planning the first phase of an approximately $5 billion investment for low-carbon iron ore concentrate and HBI production in the same region; a final investment decision is expected in 2026.

CBAM: Europe's carbon border tax and its impact on Türkiye

The European Union's Carbon Border Adjustment Mechanism (CBAM) came into full effect on 1 January 2026. The mechanism requires a tax proportional to the carbon emissions in the production process for carbon-intensive products imported into the EU, such as steel, cement, aluminium, fertiliser, and electricity.

For Türkiye, CBAM is a direct trade pressure. Approximately 35 percent of total exports to the EU consist of steel and steel products. The embedded emission intensity in hot-rolled flat steel ranges between 2.0–2.2 tonnes of CO₂ per tonne. In a scenario where the EU ETS carbon price is €70 per tonne, CBAM exposure can reach €140 to €154 per tonne. Across Türkiye, the steel sector's projected total carbon cost is estimated at €119 to €198 million per year.

This picture is forcing Turkish steelmakers into a rapid green transition. Producers that cannot comply with CBAM face the risk of losing competitiveness in the EU market.

Türkiye's green steel roadmap

Türkiye has a distinctive starting point in the green steel transition. The majority of crude steel production is already carried out using electric arc furnaces. CO₂ emissions per tonne in EAF production are around 0.35 tonnes — less than one-fifth of the blast furnace figure. This structure puts Türkiye ahead of many of its competitors in Europe.

Kocaer Çelik announced a hybrid geothermal power plant equivalent to 900 MW of solar energy and a 1 million tonne per year green steelworks investment in Aydın as part of its 2030 vision. The company aims to commission its 24 MW geothermal power plant within 2026.

Erdemir, as Türkiye's largest flat steel producer, is moving along its Net Zero Roadmap. Drawing attention with $1.1 billion in capital expenditure in 2024, the company successfully completed hydrogen injection into Blast Furnace No. 1 in October 2024 — the first concrete step toward partially replacing coal with hydrogen in the blast furnace.

Hasçelik is commissioning scrap preheating technology for the first time in Türkiye at its new steelworks in Bilecik. This technology preheats scrap steel before it enters the furnace, reducing energy consumption and consequently carbon emissions.

Türkiye is also continuing efforts to establish a national carbon pricing mechanism in its CBAM compliance process. TÜBİTAK published a Green Growth Technology Roadmap for the iron and steel sector containing targets for 2026, 2030, and 2035.

Advantages of green steel

The radical reduction in carbon emissions is the most apparent benefit of green steel. Emissions can be reduced by up to 97 percent with the H2-DRI-EAF route. But the advantages go beyond that.

Regulations such as CBAM provide a direct commercial advantage to companies with low-carbon production. Producers exporting to the EU market could save hundreds of euros per tonne. The automotive sector, data centre developers, and technology companies — names like Meta and Microsoft — are seeking low-carbon steel in their supply chains. Stegra signed a green steel supply agreement for Microsoft's data centres before even starting production.

Energy efficiency is another gain. Scrap-based EAF production consumes far less energy than the blast furnace. Production models based on renewable sources offer long-term independence from fossil fuel price fluctuations.

Challenges and obstacles ahead

The promise of green steel is great, but the obstacles ahead are equally real.

Cost: Green hydrogen production is still expensive. The price premium paid for EAF steel in Europe can reach up to 40 percent. Infrastructure investments — electrolysis plants, renewable energy capacity, hydrogen pipelines — require billions of dollars.

Green hydrogen supply: Global green hydrogen production cannot yet keep up with demand. In the US, green hydrogen supply is scarce and expensive. In Europe, infrastructure development is lagging behind expectations. Although China is reducing costs, a serious gap in global supply persists.

Energy requirements: Fully transitioning global steel production to green hydrogen requires approximately 8,000 TWh of energy annually — a target that is difficult to achieve under current conditions.

Scrap limitation: Scrap steel recycling is one of the cleanest methods, but it can meet at most one-third of global demand. Rising steel demand continues to necessitate primary production.

Financing risk: Stegra's €1.5 billion shortfall, ArcelorMittal's indefinite postponement, and Thyssenkrupp's retreat expose the financing fragility of green steel projects. Researcher Joseph Fournier argues that widespread green steel production cannot be economically viable without permanent government support.

The future of green steel: 2030 and beyond

In the short term, the sector will be shaped by regional differences. China is rapidly increasing production capacity with its cost advantage and government support. The EU's CBAM mechanism is making carbon costs tangible and green investments mandatory. Gulf countries are establishing new production centres with cheap renewable energy.

For Türkiye, the picture holds both threats and opportunities. The EAF-dominant production structure is a strong foundation, but investing in green hydrogen infrastructure under CBAM pressure is unavoidable. Kocaer Çelik's geothermal energy move, Erdemir's hydrogen injection trials, and Hasçelik's energy efficiency projects signal the Turkish steel sector's determination to maintain its position in this race.

By 2030, the commercialisation of H2-DRI-EAF technology at scale, the continued decline of green hydrogen costs, and the global expansion of carbon pricing mechanisms are all expected. Green steel is on its way from being a niche concept to becoming the new standard of the industry — but this transition will be a marathon lasting decades.