Decarbonizing the Steel Sector - 2026

Decarbonizing the Steel Sector - 2026

Summary

According to the World Steel Association, the steel industry emitted 4.1 billion tCO2e in 2024, around 75% of which came from direct emissions. This represents roughly 7%-8% of global GHG emissions. The industry is considered hard-to-abate because primary production remains heavily dependent on coal for both energy and feedstock needs. While near-term demand has softened, with OECD estimates suggesting a 2.6% contraction in 2025, the World Economic Forum projects steel demand could increase by 30% by 2050. Consequently, accelerating decarbonization in steel is critical to achieving global net-zero goals.

• This report assesses the decarbonization potential, readiness, and adoption constraints of the main pathways for decarbonizing steel, including electrification, renewable energy, hydrogen, carbon capture, utilization, and storage (CCUS), energy efficiencies, and secondary stream manufacturing. It also examines the macroeconomic conditions shaping investment decisions, including high upfront capital requirements, global steel overcapacity, and fragmented carbon pricing policy.
• To assess industry progress, the report reviews emissions performance and consolidates interim and long-term climate targets across selected steel producers. Although most major producers have announced net-zero targets for 2050, current emissions performance suggests that decarbonization investment is not yet occurring at the scale or pace implied by these commitments, with much of the effort deferred toward later decades. Achieving full decarbonization will likely require phased investment aligned with technology readiness, demand signals, and policy support.
• Hydrogen direct reduced iron (H2 DRI) and electric arc furnaces (EAFs) remain the leading pathways for deep emissions reductions in steelmaking, but their momentum has diverged over the past year. EAF capacity is expanding from an already material base (~30% of global capacity), yet its full decarbonization impact remains limited by scrap availability and access to renewable power. H2 DRI ambitions have softened as cost inflation and weak policy support have widened the green-steel premium, dampening demand. As a result, companies are scaling near-term efficiency and digital measures and investing in scrap supply-chain improvements to unlock faster emissions gains.

Key Highlights

• Many major producers target a 20-30% reduction in Scope 1 and 2 emissions by 2030, while China Baowu, the world’s largest producer, targets a 30% cut by 2035 and SSAB has set one of the only targets to include Scope 3 emissions (48% by 2033).
• Electric arc furnaces (EAFs) are the most commercially mature decarbonization route, accounting for 30.3% of global steel production in 2024. Saudi Arabia (12%), the US (11%) and Iran (10%) hold the largest shares of EAF projects under construction.
• Macroeconomic pressure is slowing investment in low-carbon technologies: the OECD estimates global excess steel capacity reached 640 million tons in 2025 and will rise to 745 million tons by 2028, with utilization at just 76% in 2025 and China’s exports (131 million tons) making up 41% of the global total.
• POSCO is the largest holder of renewable capacity among selected steel producers, with ~192MW active and 800MW of upcoming offshore wind and solar, followed by CSC (over 210MW of active and upcoming offshore wind) and Jindal Steel (~141MW of solar and onshore wind).
• CCUS capacity at steel facilities completed by 2030 has nearly quadrupled since last year’s report, from ~1.2mtpa to ~4.6mtpa, but the 20 active and upcoming projects tracked remain a small share of the ~399mtpa the IEA Net Zero scenario requires by 2050.
• Hydrogen remains the leading long-term pathway, with 56% of 2030 steel-allocated capacity now in post-feasibility stages (up from 44% in 2025) and Europe holding a 38% share. However, delays persist: ThyssenKrupp is negotiating to postpone hydrogen use at its €3 billion green steel project, Salzgitter has delayed its SALCOS expansion by three years, and Germany’s project count has fallen from 31 to 24.

Scope

• Key steel sector trends of the past year
• Net-zero targets for selected steel producers
• Steel producers’ interim and long-term emission targets
• Steel producers’ Scope 1 and 2 emissions data
• Analysis of different decarbonization technologies (energy efficiency, secondary stream manufacturing, electrification, hydrogen, CCUS), including timeline for commercial viability and suitability assessment
• Macroeconomic challenges facing decarbonizing the steel sector
• Case studies of decarbonization technologies being trialed or implemented

Reasons to Buy

• Identify the market trends within the steel industry and assess what the biggest steel producers are doing to reduce emissions, including their net-zero commitments, interim targets and reported Scope 1 and 2 emissions performance.
• Develop market insight of the major technologies used to decarbonize steel, including electrification, hydrogen, CCUS, energy efficiency and secondary stream manufacturing, with an assessment of their decarbonization potential, commercial readiness timelines, and the drivers and barriers to their implementation.
• Understand the macroeconomic challenges shaping investment decisions, including high capital costs, global steel overcapacity and fragmented carbon policy.
• Facilitate the understanding of what is happening within hard-to-abate industries as they look to become carbon neutral by 2050.