Green steel · 2026
Green Steel Revolution: How H2-DRI Replaces Coal
Hydrogen instead of coking coal. Water vapour instead of CO2. Here is what it costs in 2026.
The problem
Blast furnaces run on coal
2.32 t
CO2 per tonne of crude steel from the blast furnace – basic oxygen furnace route, the most carbon-intensive way to make steel.
Source: worldsteel Sustainability Indicators
How H2-DRI works
Hydrogen strips oxygen from iron ore
In a shaft furnace, hydrogen reacts with iron ore to make direct reduced iron. The by-product is water, not CO2.
An electric arc furnace then melts the iron into steel.
The fuel
Green only if the hydrogen is green
The near-zero route uses 100% renewable hydrogen made by electrolysis. Electricity becomes the single biggest cost driver.
Source: ICCT, Aug 2026
US cost benchmark
What a tonne of green steel costs
$812/t
US H2-DRI-EAF production cost: 34% more than a relined blast furnace (about $606/t implied), 24% more than a new one.
Source: ICCT, Estimating green steel production costs in the US, Aug 2026
Where the $812 goes
Energy and ore dominate
Energy (mostly electrolysis)39% · ~$317
Iron ore & raw materials38% · ~$309
Capital & other costs23% · ~$187
Source: ICCT, Aug 2026 (dollar split is our calculation)
The tipping point
Hydrogen at $1/kg flips the math
At $1.0/kg hydrogen, H2-DRI-EAF steel costs $491/t vs $539/t for blast-furnace steel, with no carbon price at all.
Add a $15/t CO2 price and $1.5/kg hydrogen already wins.
Source: Global Efficiency Intelligence / Transition Asia, 2024
EU CBAM
Coal steel now pays at the EU border
€82.32
CBAM certificate price per tonne of CO2, Q3 2026. That puts a gross ≈€191 of embedded carbon on every tonne of blast-furnace steel, vs near zero for green H2-DRI.
Source: European Commission. Payable share phases in from 2.5% (2026) to 100% (2034).
Closing the gap
Cheaper power, better ore
ICCT finds the premium narrows with cheaper regional industrial electricity or imported Brazilian iron ore.
Natural-gas DRI plants built hydrogen-ready can switch over as green hydrogen scales.
Source: ICCT, Aug 2026
US policy
Tax credits could erase most of the premium
34% → 5%
Ten years of 45V clean-hydrogen credits plus the proposed Steel Modernization Act support would shrink the premium to about 5%. Closing it fully: ~$308M a year per plant.
Read the full H2-DRI guide
Your next step
What does CBAM cost your steel imports?
Model certificate costs for steel, aluminium, cement and fertiliser in our free calculator.
Open the CBAM calculator →
Green steel deep-dive