The steel industry is one of the most CO2-intensive economic sectors. New steelworks are still being built whose blast furnaces run on coal, thereby locking in high emissions for decades. A study now shows: If the decision is instead made to use hydrogen-capable steelworks, a total of 73 gigatons of CO2 can be saved by 2070 alone. Although such sustainable steel mills require higher initial investments, they are significantly cheaper in the medium and long term than later offsetting the emissions that would arise from coal-fired plants. Around $800 billion could be saved in this way.
Around 70 percent of the steel produced worldwide comes from coal-fired plants. “Due to the high emissions intensity of this sector, the steel industry was responsible for seven percent of global CO2 emissions in 2023,” reports a team led by Clara Bachorz from the Potsdam Institute for Climate Impact Research (PIK). For comparison: all 27 countries of the European Union together contribute around six percent. The steel sector is currently growing massively, particularly in emerging countries where industrialization is currently progressing rapidly. Around half of the planned new steelworks are based on coal. Once built, they are usually in operation for decades, thus recording emissions well into the 2060s.
Switching to sustainability is also financially worthwhile
According to Bachorz and her colleagues, the steel sector is an area in which investments in sustainability are particularly worthwhile. “If we are serious about reducing global warming after an overshoot to 1.5 degrees Celsius, the steel sector is a really effective area to invest in now to achieve significant emissions reductions,” says Bachorz. More environmentally friendly alternatives to conventional systems using coal as fuel and reducing agent already exist: modern steelworks can use the direct reduction process using hydrogen. In addition, recycling steel scrap can reduce the need for newly produced steel.
Using detailed models of steel production and plant-level data, the researchers examined how emissions and investment needs in the global steel industry will develop up to 2070. They compared scenarios in which current trends continue with paths in which the temperature increase is reduced to 1.5 degrees Celsius or less by the end of the century through CO2 savings and the removal of CO2 from the atmosphere.
High investments, high savings
The result: Switching to more sustainable methods of steel production not only saves emissions, but also money. If steelworks continue to be built with coal-based blast furnaces, they will generate around 114 gigatons of CO2 by 2070. If you include the costs of reducing these emissions in other sectors of the economy or removing them from the atmosphere, the total cost is around $1.5 trillion. In comparison, a rapid move away from coal in steel production would save $800 billion and 73 gigatons of CO2.
“The investment amounts are considerable, but given the scale of the emissions involved, this is still a cost-effective choice,” says Bachorz’s colleague Jakob Dürrwächter. “In a scenario where we reduce warming to 1.5 degrees Celsius, all low-cost options for reducing emissions will be exhausted. If we fail to decarbonise the steel sector now, the remaining options for additional savings in other sectors will be twice as expensive.” If the course is set in good time, the average reduction costs per ton of CO2 in the steel industry are around 100 to 150 dollars, which is moderate compared to other areas.
Key role of India
These results are particularly relevant with regard to emerging countries that are currently investing in the construction of new steelworks. The biggest role here is played by India, which is currently planning the most coal-fired plants. Construction is about to begin on many of these. “If climate finance is used to redirect $50 billion to hydrogen-capable direct reduction steel plants this decade, 22 gigatons of future CO2 emissions can be avoided in India alone,” write Bachorz and her team.
Since higher upfront investments for hydrogen-capable systems can be an obstacle, especially in emerging countries, international financing is important, according to the researchers. The price development for green hydrogen is also important. Researchers are currently observing a positive trend. “If hydrogen proves to be cheaper than previously expected, India could provide other emerging countries with a blueprint for making the leap to clean steel production,” says Bachorz. “Timely investment decisions on new steel production capacity represent a crucial opportunity to avert CO₂ sequestration and bring the sector in line with climate goals.”
Source: Clara Bachorz (Potsdam Institute for Climate Impact Research, PIK) et al., Nature Climate Change, doi: 10.1038/s41558-026-02635-8