Green steel's Industrial Revolution
Companies are pioneering greener production technologies in the hard-to-abate steel sector, but a long road ahead remains.
2025 started with some sobering climate news: 2024 saw the first year-long breach of the 1.5C warming limit set by the 2015 Paris Agreement.[1] Around the same time this news broke out, MIT Technology Review, a bi-monthly magazine dedicated to science and innovation, named green steel one of its 10 breakthrough technologies of the year.[2] Steel accounts for about 8% of global greenhouse gas emissions. If technologies enabling carbon mitigation in the sector were any closer to reality, that would be a welcome – and rare - piece of positive climate news.
Global steel demand is expected to accelerate until 2050, driven by a growing and increasingly affluent population. Steel is among the sectors referred to as “hard-to-abate” because it is energy-intensive, and its inherent manufacturing processes emit greenhouse gases. Conventional steel plants use coal-based blast furnaces to turn iron ore into iron, the key ingredient in steel, in a highly polluting process. Decarbonizing the industry, therefore, requires developing and commercializing novel manufacturing technologies and infrastructure, a slow and capital-intensive process. MIT Technology Review spotlighted several companies doing just that. Stegra, a Swedish startup that uses green hydrogen to process iron ore into steel, and Boston Metal, a Massachusetts-based company using electricity in a process called molten oxide electrolysis (MOE) to do so, are some of the harbingers of this Green Steel Industrial Revolution.
MIT Technology Review’s 10 Breakthrough Technology list, published annually since 2001, shortlists 10 technologies that the magazine’s editors believe will shape the future. Recent winners have included weight-loss drugs (2023), mass-market military drones (2022), and mRNA vaccines (2021). Being featured can indicate that a technology with transformational potential is nearing market readiness and/or is already being deployed at scale (although not necessarily so). January’s climate news got me wondering how far away from maturity these novel green steel technologies really are and whether the industry is investing in them fast enough.
Stegra, previously known as H2 Steel, is Europe’s best-funded climate startup. It has raised close to $7B in debt and equity from GIC, Just Climate, and Hitachi Energy, amongst others, to launch the world’s largest green steel plant set to begin production in 2026 and fully ramp up by 2028.[3] Its full-scale manufacturing capacity will be about 4.5M tonnes, just about enough to meet 0.2% of the current global steel consumption of 1,900M tonnes annually. Today, there are 550 steel plants producing > 1M tonnes per year.[4] That adds up to a lot of aging infrastructure in need of modernization that would have to combine old and new steel production technologies, and few can hope to enjoy Stegra’s fresh start and access to capital. The steel industry is notoriously plagued by overcapacity and low margins. Cost-effectiveness, therefore, may trump decarbonization in capital allocation decision-making. Indeed, although 77% of large publicly traded steel companies acknowledge climate change as a key consideration, only 15% are building basic emissions management systems.[5]
The World Economic Forum’s Net-Zero Industry Tracker estimates that decarbonizing the steel industry by 2050 would require an investment of $3.6 trillion, around 30% of which must come directly from steel manufacturers.[6] The industry is expected to fund projects such as upgrading production infrastructure and switching to hydrogen-based production methods. Enough customers are willing to pay the green steel premium, a price increase of about 20-35% versus conventional steel, to make Stegra’s debt and equity financing viable. However, generating enough voluntary demand for green steel to finance other steel manufacturers’ decarbonization will be a tall order in the absence of globally enforced regulation. In the current geopolitical and economic landscape, this seems unlikely.
There are, however, some reasons to be hopeful. Most coal-based blast furnace steel manufacturing capacity, the most polluting kind, is located in China, and 78% of it will need reinvestment by 2030.[7] Public outcry and a menacing public health crisis have previously motivated the Chinese government to take decisive action to tackle air pollution in Beijing, for example.[8] Similar tactics might work to tackle steel sector emissions. A recent report by the Climate Bonds Initiative, a not-for-profit organization working to mobilize capital for climate action, indicates that China’s top three steel manufacturers have announced emissions reduction targets.[9] For the last two years, China was the world’s largest market for green bonds, a type of financing meant to aid companies in decarbonizing.[10] However, only 0.1% of those bonds originated from issuers in the steel sector.[11] The Chinese steel industry, therefore, has at least one underutilized decarbonization lever at its disposal. One possible scenario could see breakthrough green steel production technologies like those piloted by Stegra and Boston Metal financed by green bonds and deployed at scale, making China a global exemplar of green steel by the end of the decade.
The MIT Technology Review has generated a welcome buzz around green steel’s momentum. Stegra and Boston Metal are amongst a growing number of enterprises furnishing proof of concept that we can tackle emissions in hard-to-abate sectors. Yet the path forward is long. A concerted effort from governments, policymakers, investors, steel manufacturers, and buyers is needed to ensure the nascent technology can deliver on its promise. If successful, green steel could prove far more than the power of breakthrough technologies to solve climate challenges. It could prove that systemic change is still possible at the intersection of public and private, national and international, economic and environmental interests.
[1] Attracta Mooney, Jana Tauschinski and Steven Bernard, “World breaches 1.5C global warming target for first time in 2024,” Financial Times, January 10, 2025, https://www.ft.com/content/fd914266-71bf-4317-9fdc-44b55acb52f6
[2] Douglas Main, “Green steel: 10 Breakthrough Technologies 2025,” MIT Technology Review, January 3, 2025, https://www.technologyreview.com/2025/01/03/1108955/green-hydrogen-steel-greenhouse-gases-carbon-emissions-breakthrough-technologies-2025/.
[3] "H2 Green Steel raises €1.5 billion in equity to build the world’s first green steel plant”, Stegra, September 7, 2023, https://stegra.com/news-and-stories/h2-green-steel-raises-15-billion-in-equity-to-build-the-worlds-first-green-steel-plant; “H2 Green Steel raises more than €4 billion in debt financing for the world’s first large-scale green steel plant,” January 22, 2024, https://stegra.com/news-and-stories/h2-green-steel-raises-more-than-4-billion-in-debt-financing-for-the-worlds-first-large-scale-green-steel-plant.
[4] “These 553 steel plants are responsible for 9% of global CO2 emissions,” Only Natural Energy, November 9,2021, https://www.onlynaturalenergy.com/these-553-steel-plants-are-responsible-for-9-of-global-co2-emissions/#:~:text=Steel%20tracker,-The%20GSPT%20is&text=It%20currently%20provides%20data%20on,global%20capacity%20(2%2C453Mtpa).
[5] World Economic Forum, Net Zero Industry Tracker 2024 (2024), https://www.weforum.org/publications/net-zero-industry-tracker-2024/, 82.
[6] Ibid., 82.
[7] Climate Bonds Initiative, China’s Green Steel Decade: New Paper on Financing, Policy, and Standards (2024), https://www.climatebonds.net/2024/10/china%E2%80%99s-green-steel-decade-new-paper-financing-policy-and-standards, 2.
[8] See Hannah Ritchie’s Not the End of the World (Little, Brown Spark, 2024), Chapter 2, “Air Pollution: Creating clean air.”
[9] China’s Green Steel Decade, 5.
[10] China’s Green Steel Decade, 8.
[11] China’s Green Steel Decade, 8.