September 2026
Producing clean primary steel with near-zero emissions is technologically possible, but it is estimated to cost around 25–50% more than conventional coal-based steel production in Brazil, China, India, the European Union and the United Kingdom. Closing this cost gap is essential to enabling investment. The question for governments is how to do this affordably, and without making their steel industries less competitive.
This report sets out an approach that uses targeted, long-term subsidies to support the deployment of near-zero emission primary steel production, funded by a small, flat-rate ‘recharge’ on steel consumption. The policy is revenue-neutral for governments. The recharge applies equally to domestically produced and imported steel, with exports exempt. This creates no competitiveness risks for steel producers or downstream industries, in either domestic or global markets.
Carbon pricing can make a useful contribution to the steel transition, but on its own is insufficient. Carbon prices high enough to close the cost gap between clean primary steel and conventional steel could significantly raise costs for steelmakers and the industries that use steel. Uncertainty over future carbon prices also makes it harder for companies to commit to large, long-term investments. The report finds that combining carbon pricing with targeted subsidies could give companies greater certainty to invest in clean steel, discourage investment in coal-based production, and maintain the international competitiveness of domestic industry.
The cost to consumers of a clean steel subsidy-and-recharge policy would be unnoticeably small. When clean primary steel reaches around 10% of steel production, the increase in the price of a new car as a result of the policy could be around 0.04% in the EU, 0.09% in Brazil, and 0.2% in India. The price of a £200 washing machine in the UK would increase by around £1. The effect on construction and infrastructure projects is similarly small: less than 0.5% of the total project costs of a residential building or a highway in India, a family house or a wind power project in Germany, or a steel pipeline or railway in the UK.
Early movers could gain an advantage. Most of the world’s largest steel producing countries have net zero or carbon neutrality targets, which together imply a future global market in which only clean steel is acceptable. The International Energy Agency estimates that more than 100 million tonnes a year of near-zero emission primary steel capacity will be needed globally by 2030, compared with less than 1 million tonnes operating in 2024. Companies that invest early in clean steel technologies, with the right policy support, are likely to be well placed to compete throughout the transition.
This is a report of the Breakthrough Agenda Policy Network. Chapters on China, India, Brazil, the EU and the UK are written by researchers from those countries/regions. Each chapter sets out how a clean steel subsidy-and-recharge policy could be designed to suit the industrial, resource, and institutional conditions of the relevant country, and how it could be integrated within, or complement, other policies including emissions trading systems in operation or under development.
