The World’s Steel Comes at a Steep Climate Cost. A Swedish Company is Trying to Change That.

At a steel plant in Lulea, Sweden, workers make the world’s most essential construction material the old fashioned way: piling iron ore and coke, a kind of coal-derived fuel, in a huge blast furnace, heating the mixture to enormous temperatures, and then “tapping” the cauldron of molten metal, which sends a stream of white-hot pig iron—and showers of sparks—spilling out along a sluiceway.

But less than a mile away, the plant’s owner, SSAB, is piloting a less dramatic steelmaking process at a new facility. “It doesn’t look that spectacular,” says Martin Pei, executive vice president and chief technology officer at the Swedish steelmaker. “You don’t see very much either, because it’s all automatically-controlled.”

It’s spectacular in a different way, though. Traditional blast furnaces emit huge amounts of CO2. But SSAB’s HYBRIT pilot plant—built in collaboration with Swedish state-owned mining company LKAB and state-owned power company Vattenfall—emits nothing but water vapor when it refines iron ore. Last summer, the facility produced iron for the world’s first fossil-fuel-free steel, blazing a trail towards decarbonizing one of the world’s most heavily-polluting industries.

Steel is among the most important materials in modern society, going into everything from buildings and bridges to cars and bicycles. It’s also critical to building renewable energy infrastructure like wind turbines, which the world needs in order to eliminate fossil fuels. But making it is an incredibly polluting process, with the industry responsible for 8% of the world’s CO2 emissions. Addressing those emissions is one of the most pressing and difficult challenges of the global energy transition.

With the success of the HYBRIT project, SSAB CEO Martin Lindqvist has set the company on perhaps the most aggressive decarbonization plan in the industry, ramping up green steel production and switching over to electric steel furnaces in order to cut most of the company’s emissions from its operations in Sweden and Finland by around 2030. Their green steel endeavor might have been considered little more than a pipe dream just a few years ago. “Our colleagues in the industry, they were just [shaking] their heads, and thought that we were, at best, naive,” says SSAB CEO Martin Lindqvist. “Now everyone seems to think that this is the right way to go.”

Some 75% of the world’s steel is made using blast furnaces like the traditional one in Lulea, which use huge amounts of fossil fuels to refine iron ore. Making that process work without fossil fuels, specifically coke, is a serious metallurgical challenge. Iron is one of the most common elements on the surface of the Earth, but it’s almost entirely found in the form of iron ore, where iron atoms are bonded tightly with oxygen. The task of turning that ore into iron, and then steel, involves first stripping away those oxygen atoms. In a blast furnace, carbon monoxide generated by burning coke accomplishes that job, prying loose oxygen from the iron ore to form carbon dioxide, which is then released into the atmosphere. SSAB’s HYBRIT plant accomplishes the same task using hydrogen separated from water using renewable energy. For this hydrogen-based reduction to work, hydrogen is heated to about 1,600°F with renewably generated electricity and then injected into a furnace containing iron ore pellets. The hydrogen combines with oxygen in the iron ore to form water vapor, leaving behind what’s known as sponge iron which can then be melted down with recycled scrap to make steel.

SSAB and its partners first started working on the project in 2016. Back then, Lindqvist says, most other steelmakers trying to go green were talking about diverting carbon dioxide produced during steelmaking and burying it underground, a process known as carbon capture and storage (CCS). “CCS for us was giving a Band-Aid to a patient with a broken leg,” says Lindqvist. “If we have the chance to really solve the root cause of the real problem, why not do that?”

SSAB, LKAB, and Vattenfall spent about $2 million studying hydrogen steel technology, and in 2017, they had one of their first successes. “I still remember when I held that first piece of fossil-free steel made in a laboratory in Stockholm,” Lindqvist says. “I thought, ‘This might actually work.’” Lindqvist and other executives then went to their companies’ boards and asked for $160 million to build a pilot plant to develop the technology further. If that trial was successful, the next step was building a full scale production plant.

Last August, SSAB used the pilot plant to produce its first emissions-free steel. Workers involved in the process made a video documenting the effort. “When I saw that video … I almost had tears in my eyes because they were so proud,” says Lindqvist. “They felt that we were doing something very important, and that we were part of a solution.”

With HYBRIT’s success, SSAB is moving ahead with plans to scale up its green steel process to a million tons a year by 2026. But there are significant obstacles to a similar ramp up for other steelmakers around the world. For one thing, green steel costs about 25% more to make than its conventional counterpart, according to RMI, a climate think tank. Some steel buyers, like automakers, have been eager to purchase slightly more expensive “green steel” in an effort to cut emissions from their products’ value chain—Volvo, for instance, made the world’s first vehicle using entirely fossil-fuel-free steel from SSAB last October. But some analysts are doubtful if the wider market of steel buyers will be willing to pay more.

Another problem is that the green hydrogen steelmaking method only works with a kind of very high quality iron ore, which not everyone uses —though companies pursuing the technology say they are developing ways to use lower-grade ores as well. There’s also an international dimension: even if policies in Europe and the U.S. help facilitate a transition to zero-carbon steel, the biggest player is still China, which produces half the world’s steel, largely in coal-fired blast furnaces. “China is always a bit of a mystery box,” says Thomas Koch Blank, a principal at RMI. “China has very high top-down aspirations [to decarbonize steel], and it’s a little unclear how fast they trickle down to real market policy.”

There’s also the simple fact of how much needs to change in such a short time span. The world produced nearly 2 billion tons of steel in 2021. Even if SSAB decarbonizes all its furnaces, it’ll only amount to just under half a percent of the world’s annual production. “Things are going very fast,” says Domien Vangenechten, a policy advisor at European climate think tank E3G. “But it’s way too early to say that we are on the right trajectory towards net-zero emissions in the steel industry.”

Still, Vangenechten says, the past three years have been “remarkable” compared to where things were before. SSAB isn’t the only company leading that change—Swedish startup H2 Green Steel, for instance, is also aiming to commercialize hydrogen-based steel production in coming years. What’s unique about SSAB is that they’ve been in the steelmaking business for more than 140 years, an anomaly in a world where many legacy companies tend to do all they can to delay climate action. And while the conventional climate narrative has been that polluting sectors only change when outside disruptors like Elon Musk or Engine No. 1 shake things up, Lindqvist, CEO of SSAB since 2011, is an old hand in the steel world, having worked at the company for nearly two and a half decades.

Those facts might be an exception that proves a rule about old, polluting industries. Or perhaps it’s a signal that those companies actually have more capacity to change than their executives assume, if they decide to step up to the moment. For Lindqvist, the decision to pursue radical decarbonization came partly as a cold-eyed business plan, and partly because it was the right thing to do. “Everyone has a responsibility to reduce emissions,” he says. “But as the CEO of a big emitter of carbon dioxide, I have a big responsibility.”