Near the Arctic Circle in northern Sweden, a groundbreaking €6.5 billion project is underway.
H2 Green Steel aims to slash carbon emissions from traditional steelmaking by a remarkable 95%. By mid-2026, they plan to start producing “green” steel at their Boden site, initially supplying 2.5 million tons annually to the European market and ramping up to 5 million tons by 2030.
The project’s core innovation is the use of hydrogen – produced through electrolysis using Sweden’s surplus green hydroelectric power – as a replacement for coking coal. This hydrogen reduces iron ore into hot “green” iron, and mixed with recycled scrap. Electric arc furnaces roll the mixture into fresh steel.
The integrated plant’s 700MW electrolyzers will produce 100,000 tons of hydrogen annually, making it one of Europe’s largest planned green hydrogen facilities.
Global Need for Decarbonization
While H2GS’s planned output is modest compared to the EU’s total steel production of 152 million tons per year, the Boden plant aims to be a model for decarbonizing steelmaking worldwide.
The need is urgent: steel production, heavily reliant on coking coal in blast furnaces, generates massive CO₂ emissions. While electric arc furnaces used for recycling are less carbon-intensive, their environmental impact depends on the power source.
The steel industry accounts for 7-9% of global annual CO₂ emissions. Substituting hydrogen for coal in steel production eliminates CO₂, producing only water vapor.
Scaling Green Steel Production
H2GS CEO Henrik Henriksson envisions expanding beyond Sweden, identifying Canada, Brazil, the US, and Portugal as potential locations for hydrogen-powered plants, given sufficient renewable energy.
However, H2GS’s short-term success hinges on securing customers willing to pay a premium for green steel. Henriksson acknowledges, “There is a green premium over the brown steel index – people are paying 25 to 30 percent more for green steel.”
Securing a Green Steel Market
The company has already secured “take or pay” contracts for half of its initial output target from manufacturers like BMW, Porsche, Volvo Group, and Scania, who prioritize reducing their supply chain emissions.
Meanwhile, rival Swedish venture Hybrit has delivered “fossil-free” steel from its pilot plant and plans full-scale production by the end of the decade. Other European steelmakers are also accelerating their decarbonization efforts, supported by government subsidies.
Challenges and Opportunities Ahead
The UN-backed Leadership Group for Industry Transition (LeadIT) tracks decarbonization efforts in heavy industries. Their latest Green Steel Tracker identified 99 investments in low-carbon steel production, primarily in Europe, with hydrogen direct reduction as the leading method.
However, planned coal-based blast furnace capacity still far exceeds that for greener steel production, highlighting the need for faster adoption of green technologies.
ArcelorMittal, the world’s second-largest steel producer, secured €3 billion in EU state support for greener projects, including switching to electric arc furnaces and using DRI facilities where green hydrogen can replace natural gas.
Yet, ArcelorMittal emphasizes that wider decarbonization depends on access to affordable natural gas, renewables, and green hydrogen, with infrastructure development lagging.
Despite challenges, growing carbon taxes and emission regulations are expected to incentivize cleaner production and level the playing field for green steel. As brown steel prices rise, green steel will become more competitive, leading to a more sustainable future for the steel industry.