The steel industry accounts for approximately 7–9% of global CO₂ emissions, making it one of the most carbon-intensive industrial sectors. Hydrogen-based direct reduced iron (H-DRI) has emerged as a promising pathway to decarbonization, since it can reduce LCA emissions by up to 90% compared to conventional blast furnace routes, but only when powered by green hydrogen and renewable electricity.
Over the last decade, approximately 70% of all steel has been made from pig iron produced by reducing iron oxide in a blast furnace (BF) using coke or coal, followed by reduction in an oxygen-blown converter. The remaining 30% is obtained either from scrap (23%) or from direct reduced iron (DRI) (7%) melted in electric arc furnaces prior to refining.
Hydrogen-based DRI replaces carbon-rich reducing agents, such as syngas or coke, with hydrogen gas. As a result, there is no carbon available to react with oxygen in iron ore to form CO₂. Instead, the reaction produces water vapor:
Fe₂O₃ + 3H₂ → 2Fe + 3H₂O
Since the resulting "sponge iron" is subsequently melted in an electric arc furnace (EAF), overall emissions can drop significantly—to as little as 2.8% of emissions from the BF route—provided the EAF is powered by renewable electricity.
It is worth noting that conventional DRI, which currently accounts for the majority of existing DRI capacity worldwide, typically uses natural gas rather than hydrogen as the reducing agent. Natural gas-based DRI already achieves moderate emissions savings compared to the BF-BOF route—generally in the range of 30–40%—and is often viewed as a transitional technology, since existing natural gas DRI plants can, in many cases, be retrofitted or blended with increasing shares of hydrogen over time. This creates a practical bridge between today's natural gas DRI infrastructure and a fully hydrogen-based future, rather than requiring an abrupt technological leap.
Previous modeling studies have shown that production costs for hydrogen-based steelmaking are highly dependent on electricity prices and the amount of scrap steel used. In general, hydrogen DRI becomes cost-competitive only under conditions of low electricity costs (up to €40/MWh) combined with a high carbon tax (at least €34 per tonne of CO₂).
Another critical factor is industrial-scale deployment, which is the central goal of the HYBRIT project in Sweden. HYBRIT is a joint initiative by SSAB, LKAB, and Vattenfall aimed at achieving commercial-scale fossil-free steel production by 2035. The first steel produced using 100% fossil-free hydrogen was rolled out in 2021, marking a significant milestone for the technology.
HYBRIT is not the only large-scale initiative pursuing this pathway. In Germany, thyssenkrupp's "tkH2Steel" project and Salzgitter's "SALCOS" program are both progressing toward hydrogen-based DRI at industrial scale, supported by national and EU subsidy schemes. Similarly, ArcelorMittal has announced hydrogen-ready DRI plants in Spain and Germany, illustrating that the transition is increasingly being pursued across multiple major steel-producing nations rather than being confined to a single pilot project. This broader industry momentum suggests that hydrogen steel technology is moving from the demonstration phase toward early commercial deployment, although timelines remain contingent on hydrogen availability and public funding support.
Table 1. High-Level LCA Comparison: Blast Furnace–Basic Oxygen Furnace vs. Hydrogen-DRI + Electric Arc Furnace
From an LCA perspective, hydrogen-based steel production enables several key benefits across emissions scopes:
Beyond the emissions comparison itself, it is worth noting that hydrogen DRI also alters other LCA-relevant parameters not captured in Table 1. For instance, the H₂-DRI + EAF route generally has a higher water demand than the BF-BOF route, largely due to the water required for hydrogen electrolysis, while also producing less solid waste, since it avoids the generation of blast furnace slag and coke by-products. These secondary trade-offs reinforce the importance of the multi-indicator LCA approach discussed elsewhere in this series, rather than relying on carbon metrics alone when comparing steelmaking routes.
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The environmental benefit of hydrogen-based steel is also strongly determined by the carbon footprint of the hydrogen used in its production:
Figure 1: Comparison of grey, blue, and green hydrogen production pathways
Many LCA studies confirm that hydrogen produced via renewable-powered electrolysis can reduce steel production emissions by 80–95% relative to the BF-BOF route. However, without renewable electricity, hydrogen DRI merely shifts emissions upstream rather than eliminating them entirely.
The International Energy Agency (IEA) Net Zero Scenario identifies hydrogen DRI as critical to achieving global climate targets by 2050. The IEA envisions that approximately 44% of global iron production will be derived from hydrogen-based processes—though reaching this target requires a massive scale-up effort, including hundreds of additional TWh of low-carbon electricity generation capacity.
Several major scale-up challenges remain:
These constraints imply that regions with abundant renewable energy resources—such as the Nordic countries, Brazil, China, and the Middle East—are better positioned to become future "green steel" production hubs. Cost projections indicate that falling renewable electricity prices, combined with continued electrolyzer scaling, could make green hydrogen cost-competitive within the next decade in these favorable regions.
A further consideration shaping this outlook is the emergence of demand-side mechanisms designed to bridge the current cost gap between green and conventional steel. Initiatives such as green public procurement policies, "green steel premiums" negotiated directly with automotive and construction customers, and carbon border adjustment mechanisms (CBAM) in the EU are all intended to make low-carbon steel commercially viable before renewable electricity and electrolyzer costs fall on their own. These policy and market instruments are likely to play as significant a role in the pace of adoption as the underlying technology costs themselves.
Hydrogen-based direct reduced iron represents one of the most promising pathways for decarbonizing the global steel industry, with the potential to cut lifecycle emissions by up to 90% relative to conventional blast furnace routes. However, realizing this potential depends entirely on the availability of low-cost renewable electricity and green hydrogen at scale. Without these enabling conditions, hydrogen DRI risks merely relocating emissions rather than reducing them—underscoring the importance of pairing technological deployment with renewable energy infrastructure investment.
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