Investing before 2030 to pivot away from coal in steel production is now 53 percent, or roughly 800 billion US dollars cheaper than what it would cost to reduce the same amount of emissions later on in other parts of the economy or through carbon removals (1.5 trillion dollars), in a scenario that returns warming below 1.5°C. The findings are a part of a new study out today in Nature Climate Change led by scientists at the Potsdam Institute for Climate Impact Research (PIK).
Steel production accounted for 7 percent of global emissions in 2023 – more than the annual emissions of the European Union. Coal-based steel represents roughly 70 percent of global production.
The sector is expanding, especially in emerging economies undergoing rapid industrialisation. Around half of all planned projects are coal-based, and once built will likely operate for decades, locking in emissions well into the 2060s.
“If we’re serious about returning warming to 1.5°C after overshoot, the steel sector is a really effective place to invest now to achieve significant emissions savings,” commented lead author Clara Bachorz from PIK.
The author team, including representation from the Interdisciplinary Transformation University Austria, used detailed steel production modelling and plant-level data to explore the sector’s emissions trajectory and investment needs to 2070. They compared scenarios where current trends continue, against pathways where temperature increases return to 1.5°C or below by the end of the century.
“The key difference for the steel sector is whether coal-fired plants continue being built and refurbished, or get replaced by cleaner alternatives like hydrogen-ready steel plants or scrap steel recycling,” said Bachorz.
Redirecting investment towards these cleaner alternatives could prevent a total of 73 gigatonnes of CO2 from being emitted by 2070: more than 60 percent of the projected emissions if coal-fired plants continue to be built (114 gigatonnes of CO 2 ).
The team then compared the cost of this investment shift to achieving equivalent emissions reductions through deeper decarbonisation in other sectors of the economy, or through carbon removal.
“The investment volumes are substantial, but the scale of emissions involved still makes it a cost-efficient choice,” the other lead author of the paper Jakob Dürrwächter said.
“In a scenario where we return warming to 1.5°C, all the low-cost options for emission reductions are utilised. If we miss the opportunity of decarbonising the steel sector now, remaining options for additional savings in other sectors are twice as expensive,” he added.
Policies key to avoid steel emissions lock in
In addition to pivoting plans for new plants away from coal, the modelling in the study shows that, in a scenario where temperatures return to 1.5°C, the sector would also have to accelerate the retirement of existing coal-fired plants and replace them with lower emission alternatives. This would shorten plant lifetimes – especially in China, where most plants have been built recently.
“Blast furnaces typically require a first relining after 20 years. At 10 percent of the initial plant investment, relining is economically viable without emissions considerations. But together with strong policy signals, it provides an opportunity to retire a furnace. On the other hand, blast furnaces built over the next decade could lock in emissions well into the 2060s – even if they are only relined once,” commented Dürrwächter.
India’s trajectory most significant for future steel emissions
According to the study, India has the largest pipeline of planned coal-fired plants, but most haven’t broken ground yet. This creates a narrow window this decade to redirect investments towards lower-emission technologies.
The modelling shows 22 gigatonnes of CO 2 could be saved in India alone by redirecting 50 billion dollars in near-term investment (2026-2030) away from coal-fired capacity towards hydrogen-ready plants. However, this transition faces a financial barrier, as hydrogen-ready plants require larger upfront investment, and emerging economies typically face significantly higher financing costs.
“The feasibility of a rapid transition towards lower emissions steel in India is highly sensitive to financing conditions. International finance that reduces investment risk could enable the scale-up of hydrogen-based steel and prevent capital costs from becoming prohibitive,” Bachorz said.
Still, there are reasons for optimism. Recent auctions under India’s National Green Hydrogen Mission delivered lower-than-expected prices for green hydrogen-based ammonia, suggesting hydrogen steelmaking costs could fall faster than anticipated.
“If the declining cost trend for hydrogen holds, India could provide a blueprint for other emerging economies to leapfrog to clean steel production,” Bachorz concluded.
Nature Climate Change
Computational simulation/modeling
Not applicable
Averting the steel carbon lock-in through strategic green investments
21-May-2026