Key Points:
- The European Union wants carmakers to use low-carbon steel to meet emission goals.
- Green steel uses renewable hydrogen, which is currently rare and expensive.
- Early estimates suggest this new steel will cost about a third more than standard steel.
- Major steel producers are delaying projects due to a lack of available hydrogen.
European automakers are facing a tough new challenge from regulators. To meet strict environmental targets, the European Union plans to push car manufacturers to buy “green steel.” The problem is that this new type of steel barely exists yet, and it comes with a hefty price tag.
The EU recently changed its emission goals for 2035. Instead of completely banning combustion-engine cars, regulators lowered the emission cut to 90 percent. However, to make up that remaining 10 percent, automakers must start using low-carbon steel and alternative fuels. Officials plan to introduce this rule as part of the Industrial Accelerator Act this month.
Green steel relies on green hydrogen, a clean fuel made using renewable energy. Unfortunately, producing this hydrogen at a massive scale is currently proving too expensive and difficult. Steel companies like Stegra expect this new product to cost about a third more than conventional steel when it finally hits the market.
Because of these poor economics, major steelmakers are hitting the brakes. Companies like ArcelorMittal and Salzgitter are delaying or pausing their green steel projects. Genuino Christino, the CFO of ArcelorMittal, admitted bluntly that the industry simply does not have enough hydrogen available to make this work right now.
The auto industry is frustrated. Automakers consume a fifth of Europe’s steel, but they cannot control how fast steelmakers develop this new technology. Hildegard Mueller, president of Germany’s auto lobby, complained that the car industry is now dependent on developments completely outside its influence.
Adding to the chaos, nobody actually agrees on what “green steel” means. Executives call the current market a “wild west” where different companies use varying metrics to market their lower-emission products. Until the supply catches up with the new rules, carmakers will struggle to meet the EU’s ambitious environmental demands.
