March 2022
The EU has set a goal of a 55% reduction in carbon emissions by 2030 (compared to 1990) and net zero carbon emissions by 2050. A key part of achieving these goals is the European Union Emissions Trading System launched in 2005.

It operates on a ‘cap and trade’ system, where maximum emissions are set and allowances over the maximum are allocated and auctioned and can be traded with other companies. Emissions reductions of 61% from 2005 levels for businesses have been proposed in the Fit for 55 package.

As of 25th February 2022, the EU price for carbon emissions was EUR88.14/t (US$103.7/t). The EU is also providing positive investment in carbon emissions reduction technologies through its EUR1.1bn (US$1.3bn) Innovation Fund, through which Swedish steelmaker SSAB has already received funding. European steel mills, therefore, have the greatest economic incentive for decarbonisation in the world.

In addition to European regulations and funding, the US and the EU ended their steel trade dispute in October 2021. They have agreed to collaborate on green steel together and have set a date in two years’ time for negotiations on a trade agreement that will favour low-carbon, or green, steel. The EU and the US could agree on a scheme that resembles the EU’s carbon border adjustment scheme, which will penalise steel producers with larger carbon emissions and protect the expensive decarbonisation efforts of European steelmakers.



State-owned Swedish steelmaker SSAB has become the poster child of European steel decarbonisation. It has responded to increasing demand for low-carbon-emissions steel by repeatedly accelerating its decarbonisation plans. In January 2022, it committed to converting the Oxelösund blast furnace to an EAF by 2025 and the Raahe and Luleå blast furnaces to 2.5Mtpa EAFs by 2030.

To address the challenges of using purely scrap steel, SSAB plans to produce 1.3Mt of close to zero-emissions hot briquetted iron at its demonstration plant in Gallivare, Sweden, as part of its Hydrogen Breakthrough Ironmaking Technology (HYBRIT) project. This will allow SSAB to produce 1.2Mtpa of close to zero-emissions steel from 2026. It has already produced a small amount of close to zero-emissions steel using its pilot HYBRIT facility for direct reduction of iron (DRI) in Luleå.

SSAB plans to eliminate the vast majority of its emissions by 2030. This will amount to a reduction of 8Mtpa of CO2, which corresponds to a 10% and 7% reduction in emissions for Sweden and Finland, respectively. So far, SSAB’s HYBRIT project has cost SEK1.5-SEK2.0bn (US$170-US$230m), with costs shared by SSAB and its partners LKAB, Vattenfall and the Swedish energy agency.



Larger steel producers will have to take a different approach to that of the smaller and highly government-supported SSAB. ArcelorMittal Europe has estimated the cost of its operations achieving close to zero net carbon emissions by 2050 to be EUR15-EUR25bn (US$18-US$29bn) using its proposed Smart Carbon production route, which relies on carbon capture and storage and, later, hydrogen.

It estimates using hydrogen-based direct reduced iron in EAFs will cost EUR30-EUR40bn (US$35-US$47bn). This is without considering the clean energy infrastructure required for either of these routes, which could cost up to EUR200bn (US$235bn).

ArcelorMittal has stated goals of decreasing carbon emissions by 35% by 2030 and achieving net zero carbon emissions by 2050. The company already operates Europe’s only DRI-EAF facility in Hamburg, which uses natural gas to reduce iron ore. The iron ore is combined with scrap in the EAF.

ArcelorMittal is planning a EUR110m (US$129m) investment in the Hamburg H2 project, and in September 2021 the German government committed EUR55m (US$65m) to the project. Hamburg H2 will test the possibility of producing DRI with 100% hydrogen at a scale of 0.1Mt and how this DRI will perform in an EAF.

The pilot plant will initially use grey hydrogen in the leadup to green hydrogen becoming commercially available. The renewable energy for green hydrogen production could be produced by wind farms off the coast of Northern Germany.

ArcelorMittal, with support from the French government, will invest EUR1.7bn (US$2.0bn) in decarbonisation efforts in France. It will build a 2.5Mtpa EAF in Fos-Sur-Mer and a 2.5Mtpa hydrogen based DRI unit plus EAF in Dunkerque. These facilities will be operational by 2027, with a blast furnace in Fos-sur-Mer and two blast furnaces in Dunkirk phased out by that year. These projects are expected to decrease ArcelorMittal’s carbon emissions in France by 40% (or 7.8Mtpa) by 2030.

The company also plans to build a 2.3Mtpa green hydrogen DRI unit coupled with a 1.1Mt hybrid EAF at Gijón in Spain, which would be the world’s first full-scale zero carbon-emissions steel plant. The company has signed a memorandum of understanding with the Spanish government describing a joint investment of EUR1bn (US$1.2bn) in the project, which will begin production at the end of 2025.

The project will reduce emissions by increasing the use of steel scrap and hydrogen-based DRI in its EAFs and by powering all steelmaking assets with renewable electricity.

ArcelorMittal is planning large-scale hydrogen-based DRI-EAF steelmaking in Bremen and a smaller pilot plant in Eisenhuttenstadt. The sites could be producing 3.5Mt between them by 2030, saving 5Mt of CO2 emissions. The conversion could cost EUR1-EUR1.5bn (US$1.2-US$1.8bn).

ArcelorMittal has also planned a EUR1.1bn (US$1.3bn) investment with the governments of Belgium and Flanders into its Gent steel plant. It will build a 2.5Mt DRI plant and two EAFs at the site. The plan is for a gradual transition from the existing Gent blast furnace, refurbished in 2020 for EUR195m (US$229m), to the DRI and two EAFs, with the blast furnace closing by 2030. This should result in a reduction in CO2 emissions of around 3Mtpa.

In addition to these projects, ArcelorMittal is developing a carbon capture and utilisation project at Gent, in collaboration with Vanheede Environment Group, Ghent University and CRM group, called SMART: steelmaking with alternative reductants.

SMART will replace coal-derived reductants with reductants recycled from plastic waste, called AlterCoal® pellets. Carbon captured from blast furnace emissions will be converted to bio-ethanol by the Steelanol process. This ethanol can then be integrated into the mainstream chemical and plastic manufacturing industry.

End of life plastics can again be used to make AlterCoal® pellets, completing the renewable cycle. This project will be commissioned in 2022 and is expected to reduce carbon emissions by 0.9Mtpa. It has received funding of EUR3.4m (US$4.0m) from the EU’s Life Program. ArcelorMittal has repeatedly affirmed, in company press releases, the importance of government funding to afford decarbonisation infrastructure.



Thyssenkrupp Steel plans to reduce its carbon emissions by 30% from 2018 to 2030 and achieve net zero carbon emissions by 2045. It also aims to produce 0.4Mt of green steel in 2025 and 3Mt in 2030. It has outlined a two-path strategy for achieving these goals, expected to cost EUR10bn (US$12bn).

On the first path, Thyssenkrupp will use green hydrogen where possible for its blast furnaces in the short term (2019-2022) and gradually transition its four coal-fired blast furnaces to four green hydrogen DRI units paired with four electrical melting units. These DRI and melting units can be paired with a basic oxygen furnace, much like in traditional blast furnace steelmaking.

Thyssenkrupp will replace one blast furnace with a 1.2Mtpa DRI plant running on natural gas, and later green hydrogen, paired with a melting unit from 2025. Another blast furnace will be replaced by 2029 and all four will be replaced by 2045 (Duisburg’s current blast furnace capacity is 11.7Mtpa). Thyssenkrupp has said that 0.72Mtpa of hydrogen will be required for this strategy, equivalent to that produced by 3,800 wind turbines.

The second path will use Carbon2Chem®, a carbon capture and utilisation technology, to capture unavoidable carbon emissions from the basic oxygen furnaces and convert them to methanol for the chemicals industry. Since 2016, the project has received EUR60m (US$66.6m) from the German federal government, and from 2020 on, another EUR75m (US$88m) will be added.



Salzgitter, another German steelmaker, has targeted a reduction in carbon emissions of 30% by 2030, 50% by 2030 and 95% by 2033. It has constructed a pilot natural gas and hydrogen-powered DRI plant in Salzgitter that will begin production in early this year. Like Thyssenkrupp, it plans to replace blast furnaces with hydrogen-powered DRI units, with the first large unit to commence operation in 2026.

Unlike Thyssenkrupp, Salzgitter will process its DRI in an EAF. Salzgitter has constructed a 30MW wind farm for EUR50m (US$59m) which will provide green electricity to produce green hydrogen from water electrolysis, as in the GrInHy2.0 and WindH2 projects.



Austrian steelmaker Voestalpine plans to reduce its carbon emissions by 30% by 2030 and achieve net zero carbon emissions by 2050 (although it remains to be seen how the Austrian government’s more ambitious target of 2040 will change the company’s plans). Its plan for achieving these climate goals is to shift from blast furnace steelmaking to green electricity-powered EAFs by 2030 and to completely replace coal with hydrogen as the reducing agent by 2050.

Specifically, Voestalpine will replace two 0.9Mt blast furnaces at Linz and one 0.75Mt blast furnace at Donawitz with EAFs by 2030. The rest of the blast furnaces will be replaced with EAFs by 2050. This plan depends, in part, upon the Austrian government achieving its target of 100% green electricity by 2030.

To achieve these decarbonisation goals and maintain the same quality of steel, Voestalpine will require direct reduction of iron facilities. Since 2017, it has operated a US$1.01bn 2Mtpa hot briquetted iron (HBI) facility in Texas in the US, which ships to its Austrian steel mills.

This facility is inadequate to fully replace blast furnace production of pig iron for Voestalpine’s crude steel production. As a result, it is also developing a project in Donawitz to reduce iron in a fluid state using hydrogen, called Hyfor. The resulting hot sponge iron could be fed into an EAF or made into HBI.

Another project, SuSteel, will use a novel hydrogen plasma technology to reduce iron ore directly in an electric arc furnace. In 2019, Voestalpine also finished construction of a 6MW pilot proton exchange membrane electrolyser for producing hydrogen. This facility is part of its H2FUTURE project, which has received EUR18m (US$21m) in funding from the EU.

The electrolyser is the beginning of Voestalpine’s development of its hydrogen production capacity to replace coal as a reducing agent in the long term. Another project, Sun Storage 2030, will research the conversion of former natural gas reservoirs into hydrogen storage. This would allow the excess hydrogen generated by solar in summer to be stored for use in winter.


Where to now?

Europe is attempting to lead the world in decarbonisation of the steel industry, with tough carbon emission regulations (the “stick”) and so far generous government investment (the “carrot”). With significant investments and pledges by Europe’s largest steel producers, including ArcelorMittal and Thyssenkrupp, Europe’s steel industry may just survive the purge of carbon-intensive industries in Europe.

The creation of a new carbon economy may give European and US steel producers the leverage against Chinese steelmaking dominance they have been yearning for.