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Glossary · Energy industry & energy transition

Green Steel

Green steel hydrogen Industry Decarbonization DRI Electric Furnace steel industry Direct Reduction

Green steel is steel whose production causes significantly fewer greenhouse gas emissions than the conventional blast furnace and basic oxygen furnace route (BF-BOF, from Blast Furnace and Basic Oxygen Furnace). It does not mean a new material with different basic properties. The term describes a production route and its climate footprint. Steel remains an alloy of iron and a little carbon, with further elements depending on the grade. What differs above all is the path from iron ore or scrap to the finished steel product.

Overview of process routes

Green steel is usually associated with hydrogen-based direct reduction. Here, iron ore is not reduced with coke in a blast furnace but in a direct reduction plant, producing solid sponge iron, known as direct reduced iron (DRI). Ideally, hydrogen serves as the reducing agent. The sponge iron is then usually melted in an electric arc furnace (EAF) and processed further into steel. This route is called DRI-EAF. Its climate impact, however, depends on the hydrogen being produced with low emissions, for example as green hydrogen. The electricity for electrolysis, furnace and auxiliary systems must also have a low CO₂ intensity.

The orders of magnitude are shown by the statistics of the World Steel Association, worldsteel. For 2024 it reports a global average of 1.92 tonnes of CO₂ per tonne of crude steel. By route, this is around 2.34 t for BF-BOF, 0.69 t for electric furnaces using predominantly scrap, and 1.47 t for the DRI-EAF route as commonly operated today. If methane, nitrous oxide and emissions from ore mining are included, the global average rises to 2.18 t CO₂ equivalent. Important: today's DRI route operates almost exclusively with natural gas or coal rather than hydrogen. It is therefore far from near-zero-emission production.

The blast furnace does not emit a lot of CO₂ merely because it is heated inefficiently. The cause is chemical: carbon binds the oxygen from the iron ore, producing CO₂. In reduction with hydrogen, the main reaction product is water vapour. With natural gas as the reducing agent, emissions usually fall compared with the blast furnace, but do not disappear. Natural gas direct reduction can be a transitional step if the plant can later be converted to hydrogen. It cannot be equated with green steel.

Reference unit and system boundary

What matters is not the tonne of steel alone, but the quantity of greenhouse gases per tonne of product. It is usually stated in kilograms or tonnes of CO₂ or CO₂ equivalent per tonne of crude steel, slab, rolled product or end product. The system boundary is equally important. A calculation may capture only the plant's direct emissions. It may also include purchased electricity and upstream chains such as ore mining, transport, hydrogen production, lime, electrodes and alloying agents. These levels are described by the classification into Scope 1, Scope 2 and Scope 3. worldsteel demonstrates this itself: since the extension to further gases and to mining, the reported values are higher, without actual emissions having increased. Two products can therefore both be marketed as green and still have very different climate footprints.

Not a protected term: definitions and thresholds

Green steel is not a legally protected term. There is no uniform, globally valid threshold above which steel is green. Some providers mean near-zero-emission steel made from hydrogen and renewable electricity. Others mean steel with merely reduced intensity, for example through more scrap, natural gas direct reduction, green electricity in the electric furnace, or reductions allocated on paper. A label alone therefore does not show which emissions were actually avoided.

As orientation, the International Energy Agency (IEA) proposed in 2022 to distinguish two levels. "Near-zero emissions" stands for production that is compatible with an energy system with net-zero emissions. "Low-emissions" stands for significant progress that does not yet reach this goal. In the IEA proposal, the threshold for near-zero-emission crude steel lies between about 50 and 400 kg CO₂ equivalent per tonne, depending on the scrap share. Primary steel without scrap has the more generous limit of 400 kg, pure scrap steel the stricter one of 50 kg. Voluntary schemes such as the Low Emission Steel Standard (LESS), initiated in Germany, or the ResponsibleSteel standard build on this approach.

Distinction from recycled steel and climate neutrality

Recycled steel made from scrap can be produced in an electric furnace with far lower emissions than primary steel made from ore. The route values from worldsteel also show this. Scrap is therefore an important lever of decarbonisation. But it does not cover the entire demand: scrap is limited, quality requirements differ, and much steel remains tied up for decades in buildings, vehicles and machinery. For growing or demanding markets, primary steel will continue to be needed. Green primary steel and high-quality recycling therefore complement each other. The scrap-dependent IEA threshold is intended to prevent a high scrap share alone from counting as climate performance.

Green steel must also be distinguished from steel marketed as climate neutral. Climate neutrality can mean that remaining emissions are merely offset on paper through certificates. Green steel, by contrast, should denote genuine reductions in the value chain. Even with largely converted routes, residual emissions remain, for example from lime, graphite electrodes, carbon-containing additives, alloying agents and transport. If a product is called climate neutral, it should be checked which part of the balance results from offsetting.

Significance for the electricity and hydrogen system

In the blast furnace, coke is both an energy carrier and a chemical reducing agent. The hydrogen route splits these tasks. Hydrogen must be produced, transported and often stored. The electric furnace requires large electrical capacity. In addition, electricity is needed for electrolysers, compressors, oxygen production, rolling mills and heat processes. Steel production thus depends more heavily on electricity consumption, on grid connections at high voltage levels, on grid expansion and on hydrogen infrastructure.

A direct reduction plant therefore does not reduce emissions merely through the change of plant. It needs sufficient low-emission hydrogen at prices suitable for industry, a secure electricity supply, storage and long-term planning certainty. An electric furnace likewise does not guarantee low emissions. Its footprint depends on the feedstock (scrap, sponge iron or a mixture) and on the electricity mix. In a fossil-dominated electricity system, part of the emissions merely shifts from the steelworks to the power plants. Industrial policy, electricity market design, hydrogen rules and grid charges therefore directly affect the economic viability of green steel.

The time dimension also matters. Steelworks run largely continuously and cannot follow the fluctuating supply of wind and solar power at will without jeopardising quality, capacity utilisation and delivery commitments. Flexibility is possible at individual points: at electrolysers, through hydrogen and sponge iron storage (for example as briquetted HBI), through the scrap share, or through the operating mode of the electric furnace. The notion that steelworks will in future produce only when there is surplus electricity is, however, too simple.

Economics and legal framework in the EU

Green steel changes the costs of steelmaking. Coke, coal and the blast furnace lose weight. Electricity, hydrogen, electrolysis capacity, grid access and capital become more important. The plants run for decades, so companies must decide before future prices, rules and infrastructure are settled. The IEA estimates that near-zero-emission crude steel without support is typically 10 to 75 percent more expensive than today's conventional crude steel. CO₂ prices, contracts for difference, subsidies, lead markets and requirements in public procurement can reduce this gap and the uncertainty.

In the EU, the emissions trading system makes CO₂-intensive production more expensive. The carbon border adjustment mechanism CBAM has been in its definitive phase since 1 January 2026. It places a CO₂ price on the embedded emissions of certain imported iron and steel goods and precursors such as pig iron, DRI and crude steel. For iron and steel, only direct emissions count for this purpose. Indirect emissions from purchased electricity are not included in the calculation. A CBAM value is therefore not a complete product carbon footprint.

An EU-wide definition of low-emission steel does not yet exist. In March 2026, the European Commission proposed the Industrial Accelerator Act (COM(2026) 100). It provides for requirements on low-emission steel in public procurement and support programmes. Which steel counts as low-emission is to be determined only by later delegated acts, based on the Ecodesign Regulation (EU) 2024/1781 and the Construction Products Regulation (EU) 2024/3110. According to the available information, the legislative procedure was still not completed in mid-2026. The precise design is therefore open.

How to recognise reliable green steel

Whether a given tonne of steel was produced in a climate-friendly way can only be assessed with information on the following points:

  • Process route (BF-BOF, natural gas or hydrogen DRI, scrap EAF) and share of scrap

  • Origin and CO₂ intensity of hydrogen and electricity, and whether allocated on paper or physically sourced

  • System boundary (Scope 1, 2, 3), reference product and gases included

  • Reference to a recognised standard with a disclosed threshold value, for example following the IEA approach

  • Clear separation of actual reduction and offsetting

Used precisely, green steel denotes demonstrably low-emission steel production. Used imprecisely, the term becomes a label that mixes technical conversion, accounting offsets and genuine reduction. It makes visible that the energy transition is reaching the basic materials industry. The climate impact arises only from production technology, energy supply, infrastructure and rules taken together.

Sources

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Edited by eCMS on 12.11.2026 05:05

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