What is it?
Currently, making steel from iron ore relies heavily on coal and other fossil fuels to provide heat and reducing agents (chemicals that remove oxygen from iron ore) (IEA, 2020; Ryan et al., 2020; Zhang et al., 2023). Improve Steel Production refers to using electric heat and hydrogen produced by electrolysis to reduce the iron ore (H2-DRI) and electric arc furnaces (EAF) to melt the resulting iron and alloy it with carbon to make steel. The solution also requires the electricity used in these processes to include significant renewable energy or other low-carbon generation. The output is varying grades of steel with different degrees of hardness and brittleness determined by slight variations in carbon content. This solution does not include processes that rely on bioenergy or CCS, since the emissions from burning bioenergy contribute to climate change and CCS is not an effective climate solution.
Does it work?
Replacing fossil fuels in steelmaking with H2-DRI-EAF that uses electrolytic hydrogen and where all electricity comes from relatively clean sources results in significantly reduced emissions. Steel made today using fossil fuels for heat and as a reducing agent results in an estimated 1.8 t CO₂‑eq
/t of steel (Bataille et al., 2021). By contrast, steel made using H2-DRI-EAF and low-carbon electricity would generate an estimated 0.12 t CO₂‑eq
/t of steel and is a more energy-efficient process (Bataille et al., 2021). EAF furnaces are already very common in steelmaking and for recycling existing steel, but are rarely combined with H2-DRI (IEA, 2020; Devlin et al., 2023). Although H2-DRI was first used on an industrial scale in 2001, that plant was shut down for economic and political reasons, and economics remain a barrier (Wang et al., 2026). Finally, technologies to make industrial hydrogen from electricity are mature (Bataille et al., 2021), but most hydrogen produced today is made from fossil fuels and is carbon-intensive. Active research is exploring other technologies that could become important for improving steel production in the future, most notably aqueous or molten oxide electrolysis, both of which use electricity to directly remove oxygen from iron ore, and can be combined with EAF to make steel (Bataille et al., 2021, Hubner Australia, n.d.).
Why are we excited?
Steelmaking is classified as a hard-to-abate industry, and H2-DRI-EAF powered by clean electricity is considered one of the best strategies for cutting emissions in this sector (Devlin et al., 2023, IEA, 2020; Bataille et al., 2021). The Net Zero Industry project forecasts that under an emissions-neutral steel scenario by 2050, roughly 40% of global steel production could depend on H2-DRI-EAF, with the remainder consisting of recycled steel (47%), steelmaking with CCS (11%), or technologies not yet defined (2%) (Bataille et al., 2021; Net Zero Industry, n.d.). The impact is potentially significant, given that steelmaking accounted for an estimated 3.7 Gt of CO₂‑eq
in 2019 (IEA, 2020). Improved steelmaking has the additional benefit of reducing air and land pollution, as burning coal releases fine particulate matter, heavy metals, and other pollutants. In China, steel production is the largest industrial source of air pollution (IEA, 2020). As demand for steel is expected to increase up to 30% by 2050 due to demand from India and other low- and middle-income countries, it is critical that new and existing production shift to cleaner, lower-emission technologies, and that policies supporting this shift be implemented.
Why are we concerned?
While proposed low-emission steel projects have attracted significant attention from the press, many have since been canceled or put on hold (Milne, 2025; Russell, 2025; Wrede 2025). As of 2025, we could find references to only a few pilot facilities producing improved steel as we have defined it here (Leadit, 2025). The entire H2-DRI-EAF process is considered to be at the large-scale prototype demonstration stage (Bataille et al., 2021). However, contributing technologies such as electrolytic hydrogen production and EAF are more mature, and H2-DRI was first used on an industrial scale in 2001 (Wang et al., 2026). The higher cost of making low-emission steel is a significant barrier to industrial adoption and consumer demand (Devlin et al., 2023; McKinsey & Company, 2024). Electricity accounts for nearly half the cost of producing low-emission steel from iron ore (McKinsey & Company, 2024).
To increase adoption, improved steel facilities need to be located in areas that can readily supply both iron ore and abundant low-carbon, low-cost electricity (McKinsey & Company, 2024). In areas such as China, where the electricity grid still relies heavily on fossil fuels, transitioning to H2-DRI-EAF risks increasing emissions unless dedicated renewables are integrated into the project. To move this solution forward, new policies are needed to create an international market for low-emission steel (IEA, 2020). Meanwhile, existing steelmaking facilities typically have lifetimes of 25–40 years (IEA, 2020), which increases the likelihood of stranded assets or continued reliance on fossil fuels by 2050. Under its Sustainable Development Scenario, the IEA (2020) projected that, by 2050, only 12% of cumulative direct emissions reductions in steelmaking will be due to electrification and the use of hydrogen (the IEA considered emissions from electricity to be indirect). Reducing demand for steel, incremental efficiency gains, and CCS are expected to make up the bulk of cumulative direct emissions reductions, according to the IEA (2020) projections.