August 2025
Steel accounts for a large portion of global emissions (7% of direct energy-related CO2 emissions) and plays an important role in many countries’ economies. Global climate change goals imply a major shift towards near-zero emission primary steel production, which currently accounts for only a miniscule share of global production, as well as a large increase in steel recycling. Keeping up with this technological change is likely to be important for the future competitiveness of countries’ steel industries.
In this study, we compare the likely impacts of different steel decarbonisation policies on the deployment of a range of low and near-zero emission steel technologies in China, India, Japan, and the US. These four countries together account for over 70% of current global steel production.
We use a technology diffusion model that simulates technology innovation effects and learning-by-doing, dynamics which will affect the overall cost and pace of the transition. We compare the impact of different policy levers on the steel production technology mix, emissions, and investment requirements in each country, as well as the combined impact of all policies implemented jointly. The policy levers tested are:
- A capacity cap on blast furnaces (without CCS).
- Carbon pricing, represented by a rising carbon tax.
- Clean primary steel subsidies together with public procurement.
- Supply-side clean steel mandates, requiring a minimum share of primary steel production to be produced with near-zero emission technologies.
The study finds that policies targeted directly at supporting new technologies – such as subsidies, public procurement and supply-side clean steel mandates – are likely to be needed to enable the deployment of near-zero emission primary steel production technologies such as hydrogen DRI and carbon capture and storage. In contrast, policies that put pressure on existing high-emitting steel plants, such as blast furnace capacity caps and carbon pricing, are more likely to encourage a shift to steel recycling and some intermediate-emissions technologies.
We also find that Governments can achieve the largest technological change and deepest emissions reductions by combining the different policy approaches.
