Green Hydrogen Could Cut EU Steel Costs by 15% by 2040, Study Finds

The steel industry, one of Europe's largest carbon emitters, may be on the verge of a green revolution. According to a report published by the think tank Agora Industry, producing steel using green hydrogen could become 15% more cost-effective than traditional fossil fuel-based methods by 2040. This could play a critical role in helping the European Union achieve its decarbonization goals.

The Dynamics Behind the Cost Advantage

The study predicts that by 2040, rising carbon prices and falling renewable energy costs will drive this transformation. Based on an assumed carbon price of EUR 170 per tonne, the report suggests the cost of steel produced via the green hydrogen-based Direct Reduced Iron (DRI) method will be EUR 510 per tonne. In contrast, the cost of steel from conventional blast furnaces will reach EUR 600 per tonne.

This cost differential creates a powerful economic incentive for the decarbonization of the steel industry. For a sector that currently accounts for 5% of the EU's total emissions and 22% of its industrial emissions, this could be a game-changing development.

Investment and Policy Requirements

Significant investment is required to realize this green transition. Agora Industry estimates that EUR 130 billion in investment is needed by 2030 to convert half of the EU's primary steel production to green methods. The report calls on policymakers to create a supportive framework to accelerate this shift.

Recommended Policy Actions

Recommendations include establishing funding mechanisms like Carbon Contracts for Difference (CCfDs) to help companies cover high initial costs, developing infrastructure such as hydrogen pipelines, and introducing "green steel" quotas. These steps would help the industry meet its projected demand for green hydrogen, which is expected to reach 4 million tonnes by 2030.

Conclusion

The Agora Industry report clearly demonstrates that green hydrogen is not just an environmental imperative but also an economic opportunity for the European steel industry. Turkey is one of the world's largest steel producers and a major trading partner of the EU. Given policies like the EU's Carbon Border Adjustment Mechanism (CBAM), decarbonization strategies are vital for Turkish steel companies to maintain their competitiveness. Investments in green hydrogen technologies by major producers like Erdemir and Kardemir will not only strengthen their position in the EU market but also contribute to Turkey's own green transition goals.