In this Q&A, Otto Gunderson of The Energy Pioneer interviews Aaron Maltais and Perez Yepthois of the Stockholm Environment Institute on the causes of the green steel slowdown, the outlook for major projects in Sweden, and the future of scaling low-emissions steel production.
Q: To what do you attribute the slowdown in new green steel project announcements since 2021?
A: Our research is focused on tracking progress, but based on statements from companies and steel analysts, several factors appear to be contributing to the slowdown.
Companies in Europe that have delayed, scaled back, or cancelled have cited the high cost and limited availability of ‘green’ (low-emissions) hydrogen, high electricity prices, insufficient development of renewable/low-emissions power sources, and delays in grid and hydrogen infrastructure. They also cite difficult market conditions, including weak demand, global overcapacity competition from lower-cost imports, and uncertain demand for green steel. In the United States, the withdrawal of support for industrial decarbonization and clean hydrogen has contributed to a more uncertain investment environment and to the cancellation or scaling back of some projects.
Key major projects, including Stegra’s plant in Boden and the HYBRIT project jointly developed by SSAB, formerly the Swedish Steel Corporation; LKAB, Sweden’s state-owned iron ore mining company; and Vattenfall, Sweden’s state-owned energy utility, are still progressing in Sweden. Successful commissioning will demonstrate that green steel technologies can be integrated at commercial scale and should increase confidence among investors and other steel producers.
Q: What lessons can be learned from the Boden project for developing green steel projects in the future? How does this plant demonstrate the commercial viability of the technology?
A: Stegra’s Boden plant is not yet operational and has faced significant financing, cost and scheduling challenges. Construction is continuing following a €1.4 billion financing round completed in June 2026, but the difficulties encountered highlight the risks associated with first-of-a-kind industrial projects.
Whilst it is too early to conclude that the project has demonstrated commercial viability, several lessons are already emerging. First, Stegra is a start-up scaling directly to very large production volumes, which is a rare approach. It can do so because the project combines established technologies, including direct reduction of iron ore and hydrogen production through electrolysis. However, the main challenge lies in integrating these systems at commercial scale.
Second, strong offtake agreements have been critical in demonstrating demand and supporting financing. However, the long-term market for premium-priced green steel will depend on supportive policies, including carbon pricing, public procurement, product standards and requirements for steel-consuming industries.
Third, location matters. Alongside the HYBRIT project, Stegra benefits from being located in northern Sweden, where access to low-emissions electricity from hydro and wind power, combined with the EU carbon market, provides important advantages.
Q: What typically leads to delays in green steel plant commissioning, and how can this be avoided in future?
A: While it is difficult to generalise across projects, several common challenges are emerging, including the cost of key inputs such as green hydrogen, insufficient infrastructure, particularly low-emissions power generation and grid capacity and challenging market conditions for steel producers.
For many projects, delays appear to be driven less by technology challenges and more by economic barriers like the high price of green hydrogen. Policies that strengthen demand and investment signals, including carbon pricing, green public procurement, and industrial mandates for low-emissions steel, will be important to de-risk projects and support their success.
A gradual transition from natural gas-based direct reduced iron (DRI) to hydrogen-based DRI (H-DRI) is one pathway being explored by companies around the world as the sector works towards near-zero emissions steel production.
Q: What regulations can be put in place to both immediately jumpstart and provide long-term growth support for the transition to green steel?
A: A successful policy framework must address both the upfront costs of first-of-a-kind plants and the long-term market conditions needed for low-emissions steel to compete. In Europe, the EU ETS and Carbon Border Adjustment Mechanism (CBAM) are central tools, designed to increase the cost of conventional, carbon-intensive production while applying a comparable carbon cost to imports. Their effectiveness will depend on credible emissions allowance trajectories, robust CBAM implementation, and confidence that policy ambition will be maintained.
The European Commission’s recently proposed Emissions Trading System (ETS) reforms will influence the pace of industrial decarbonization by reshaping carbon price signals and support mechanisms. It is also crucial that new phaseout trajectories have high credibility, with measures that create confidence to invest in green steel.
Carbon pricing alone is unlikely to be sufficient to bring the first generation of low-emissions steel plants to market. Instruments such as carbon contracts for difference, green premiums, grants, concessional finance and public guarantees can help bridge cost gaps and reduce investment risks.
Demand-side measures are equally important. Public procurement, embodied-carbon standards, and sectoral requirements for products such as vehicles and machinery can help create markets for low-emissions steel. Clear definitions of near-zero-emissions steel are also needed to distinguish genuine decarbonization from incremental improvements.
Finally, industrial policy must enable deployment through investment in infrastructure, including grids, clean power, hydrogen networks, transport and permitting. The key challenge is increasingly scaling and integrating existing technologies.
Q: How can economies of scale be reached quickly so that green steel can become a viable option in developing countries?
A: The measures and enabling conditions already described are also relevant for developing countries, but additional challenges apply. Reducing emissions from steel production requires access to low-emissions electricity, and some of the emerging and developing countries that are particularly important for the steel transition have emissions intensive power sectors. Thus, there is a need for large-scale grid decarbonization, renewable power purchase agreements (PPAs), or dedicated renewable energy generation by steel producers to facilitate steel decarbonisation strategies.
High capital costs are another significant barrier. Many developing economies have strong renewable energy and mineral advantages but face higher financing costs than advanced economies. Concessional finance, guarantees, political-risk insurance and blended-finance approaches can help close this gap while ensuring projects support national development priorities.
Technology partnerships, knowledge sharing and skills development will also be essential. Existing facilities can deliver near-term emissions reductions through improved energy and material efficiency, increased scrap use where available, and adoption of lower-emissions equipment, while longer-term investment focuses on deeper technological transformation.
In some cases, economies of scale may be best achieved through regional or international partnerships, with countries leveraging their renewable energy or high-quality ore resources to produce low-emissions iron for global steelmaking centres.
