Toolkit for procuring lower-emission steel

  • Front page
  • Toolkit for procuring lower-emission steel

The climate impacts of steel production are significant

Steel production accounts for 7–8% of global greenhouse gas emissions and 11% of carbon dioxide emissions. It is one of the most significant single sources of industrial emissions worldwide.

Limiting global warming to 1.5°C is not possible without substantial emission reductions in the steel sector. At the same time, steel is an essential and recyclable material used, for example, in the energy transition and infrastructure. Investments in the green transition require steel. Demand is therefore not decreasing—it must become low-carbon.

Traditional steelmaking generates high emissions. In the blast furnace–basic oxygen furnace (BF–BOF) process, producing one tonne of crude steel results in on average more than two tonnes of CO₂-equivalent emissions. Achieving the goals of the Paris Agreement requires that emissions from steel production decrease to approximately 0.11 tonnes of carbon dioxide per tonne of crude steel by 2050.

Transforming the steel sector requires substantial investments, commitment to new technologies, and long-term dedication. Steel production facilities have long lifespans, and the investment decisions made today will determine emission levels for decades to come. Low-emission steel production technology already exists, which makes demand a decisive factor at this stage.

Technology for lower-emission steel is already available

Steel is currently produced mainly using two methods:

  • The blast furnace–basic oxygen furnace process (BF–BOF), which uses iron ore as input
  • The electric arc furnace (EAF), which uses recycled steel as input

Virgin iron ore can also be reduced using hydrogen. This third technology enables nearly zero-emission production. Direct reduced iron (DRI) is refined into steel in an electric arc furnace (H₂ DRI–EAF).

In the hydrogen-based DRI process, hydrogen is used as the reducing agent instead of carbon. When the entire process is powered by renewable electricity, emissions can be reduced by up to 97% compared to the traditional BF–BOF process.

The green hydrogen used in iron ore reduction is produced through electrolysis using renewable electricity, making the process carbon dioxide–free. Unlike grey or blue hydrogen, where the electricity used in production is not renewable, green hydrogen is not dependent on fossil fuels.

Most emissions from steel production are generated in the early stages of the value chain, i.e. during iron ore reduction. Therefore, using recycled steel as a raw material significantly reduces emissions. However, decarbonising the steel sector requires, in particular, low-emission primary production, that is, producing steel from iron ore—since recycled steel alone will not be sufficient to meet global steel demand for at least the next 70 years. Investments in new low-emission production facilities will only materialise if there is a strong enough demand signal from steel users.

Businesses have a major role in the market for lower-emission steel

Businesses can influence the climate impact of steel both in the short term and in the long term. In the short term, the focus is on identifying and utilising existing alternatives. In the long term, the decisive factor is the type of demand signals sent to the market to guide future investment decisions.

In the short term, lower emission alternatives are already available for many steel grades. Using these options can significantly reduce value chain emissions compared to the market average.

In the long term, companies play a particularly important role in strengthening demand for near-zero-emission steel. Production facilities for such steel are currently being developed, and investment decisions depend heavily on how credible future demand appears. At present, lower-emission steel is somewhat more expensive than conventional steel, so demonstrating willingness to pay sends an important signal. If the price of EU emissions allowances rises, the competitiveness of green steel will improve.

What is meant by lower-emission steel?

There are several international definitions of lower-emission steel. Different standards, initiatives and policy frameworks define emissions levels in slightly different ways.

In addition, several steel producers have developed their own product brands to distinguish products with a lower-than-average carbon footprint. It is important to distinguish between third-party verified standards and companies’ own brands.

In this context, lower-emission steel includes:

  • near zero-emission steel, in line with a 1.5°C pathway
  • lower-emission steel, with clearly lower emissions than the current average, for example 30% lower

The Science Based Targets initiative has calculated the steel industry’s fair share of the global CO₂ emissions budget required to limit global warming to 1.5°C. Staying within this pathway requires a very rapid transition to near-zero-emission steel.

  • Standards and protocols

    Standards developed for the needs of steel producers:

    ResponsibleSteel
    A global certification framework that assesses environmental, social and governance criteria across the steel supply chain. It defines four reference levels for steel emissions, ranging from near-zero to current high emission steel production.

    WRI’s GHG Protocol for Steel
    An international accounting framework that provides guidance on how emissions in the steel sector (Scopes 1–3) are measured and how emissions are related to the volume of steel produced.

    World Steel Association’s protocols
    Guidance for allocating emissions reductions to products through a chain-of-custody approach. This means supply chain traceability and the reliable allocation of emissions benefits to products.

    ISO 14404 series
    A standard for calculating plant-level CO₂ emissions and emissions intensity.

    LESS
    A German standard that already covers a significant share of EU steel production. It is based on a similar approach to ResponsibleSteel: the required emissions levels depend on the share of scrap in the production inputs.

    Upcoming: EU low-emission steel labelling

    In spring 2026, the Eu ropean Commission announced that it will begin preparing a labelling system for low-emission steel for the EU internal market. This system would be based on the Ecodesign for Sustainable Products Regulation (ESPR).

  • Initiatives to accelerate demand for lower-emission steel

    Numerous voluntary initiatives and tools have been created to accelerate demand for steel:

    First Movers Coalition
    A global public–private initiative that creates demand for low-emission materials through procurement commitments from major buyers. Its aim is to accelerate the industrial transition towards near zero-emission production.

    RMI Center for Climate-Aligned Finance – Sustainable Steel Principles
    A set of finance-sector principles that help banks and investors assess the credibility of steel companies’ climate action and direct capital towards steel production aligned with a 1.5°C pathway.

    SteelZero initiative
    A voluntary corporate commitment programme in which members pledge to increase their use of lower-emission and near zero-emission steel in procurement, thereby strengthening market demand.

    Science Based Targets initiative (SBTi)
    An international framework that validates companies’ climate targets as science-based and supports the setting of emissions reductions in line with a 1.5°C pathway, including steel-related Scope 3 emissions.

    According to several international initiatives, steel is considered near zero-emission when its emissions are between 0.05 and 0.4 tCO₂e per tonne of steel. The threshold varies depending on the share of scrap used.

    Steel producers’ own product brands

    No clear frontrunner has emerged in the competition between international standards. From a procurement perspective, the situation has been made even more complex by a strong trend in recent years: more and more steel producers have launched their own low-emission steel product brands. These brands are offered to companies requesting lower-emission steel in tenders. The claims made under different company brands are not necessarily based on third-party verification.

  • Wholesalers and subcontractors

    Steel supply chains are often multi-tiered. Manufacturing companies typically work with wholesalers and subcontractors rather than directly with crude steel producers. However, this does not prevent emissions data from being made available across the value chain or demand signals from being transmitted through it.

    In many parts of the steel sector, supply chain transparency is already well advanced. Codes of conduct, product-specific data and traceability practices make it possible, when requested, to determine in which plant and by which production method a specific batch of steel was produced. Companies should make use of this information and maintain an active dialogue with their suppliers.

Why now?

The steel industry is in the middle of an investment cycle. By 2030, 71% of the world’s blast furnaces will reach the end of their technical lifespan. The decisions made now will determine the emissions intensity of production for the next 15–20 years. That is why financing and technology decisions for production facilities depend largely on expectations of future demand.

If demand for lower emission steel is not strong enough, investment in high-emission technologies may continue. This would put climate targets, industrial competitiveness and supply chain predictability at risk.

Companies’ procurement decisions, commitments and public statements can serve as strong demand signals. Strong demand guides investment. Companies’ procurement decisions can:

  • accelerate the uptake of low-emission technologies
  • lower costs through economies of scale
  • help secure the future availability of high-quality, lower-emission steel

Join us in accelerating demand for lower-emission steel!