REPORT: Europe leads U.S. with 35% higher subsidies for green steel
U.S. DOE to announce demonstration project grants this month; additional funding is needed
WASHINGTON, D.C. – A new white paper from Industrious Labs and Public Citizen released today reveals a significant disparity in grant subsidies between the United States and Europe for green steel investments. While Europe has awarded $5.5 billion in public subsidies across six major green steel projects, with a median subsidy of approximately $385 per tonne of iron capacity, the U.S. lags with no green iron facilities announced.
The paper’s authors project that the first potential industrial-scale green steel investments supported by federal grant subsidies in the U.S. could receive up to ~$250 per tonne of iron capacity through the Department of Energy’s (DOE) Industrial Demonstration Program (IDP). The program offers grants of up to $500 million or 50% of the cost of a project, whichever is lower. This subsidy is 35% lower than what has been awarded in Europe, underscoring the opportunity for additional U.S. federal support for green steel.
As the DOE prepares to announce IDP grantees this month, experts are emphasizing the need for enhanced funding:
“Government subsidies for green steel are a race to the top. European leaders are making significant investments through public subsidies to modernize the steel industry and meet our global emissions reductions targets,” said Hilary Lewis, Steel Director for Industrious Labs. “While the Inflation Reduction Act and the Bipartisan Infrastructure Law are an important step in cleaning up the steel industry, we need additional federal resources to compete globally and reduce health-harming pollution in steel communities.”
Despite the potential for cleaner technologies, investments in the leading pathways to iron and steel decarbonization—direct reduction with hydrogen or direct electrification—are insufficient, according to the white paper. Globally, only 33 projects are exploring these potentially fossil-free alternatives to coal-based ironmaking, with a mere 10 poised for large-scale implementation of fossil-free green hydrogen. These projects will make up just 1.2% of global iron production by 2030, reinforcing the urgent need for global commercial-scale investments in green steel.
To align with decarbonization targets, 70 green hydrogen direct reduced iron (H2-DRI) plants must be operational by 2030. In contrast, the U.S.’s existing three DRI plants in Ohio, Texas, and Louisiana operate on methane, a climate and health-harming fossil fuel. These facilities can be converted to use green hydrogen made from renewable energy.
“Steelmakers must make investments today to decarbonize their facilities to meet the growing demands for low-emissions steel,” said Jonas Algers, Lund University, Sweden. “Government subsidies play an important role in supporting the steel industry transition, but ultimately, we need steelmakers to lead.”
The steel industry, responsible for 11% of global greenhouse gas emissions, poses significant health risks to local communities due to its heavy coal reliance. The remaining U.S. integrated steel mills in the Great Lakes region contribute significantly to climate pollution and emit a range of toxic pollutants. According to Industrious Labs’ analysis, these mills rank among the top emitters of NOx, SO2, particulate matter (PM2.5), and metal chemicals in their states, contributing to a range of health issues and even mortalities. The impact of this pollution disproportionately affects communities of color and low-income families, underscoring the historic and current environmental justice harms of coal-based steelmaking.
In contrast, demand for low-emissions steel is skyrocketing, sending a major demand signal to the steel industry to transition to technologies like green H2-DRI that can eliminate the use of fossil fuels. Key sectors, such as the auto industry, are already driving 6.7 million tons of demand for low-emission steel by 2030. Thanks to attractive market signals such as price premiums and corporate climate commitments, several European green steel projects are potentially moving forward without public subsidies.
“The recent strides by leading U.S. automakers toward cleaner steel supply chains showcase the evolving market,” said Erika Thi Patterson, auto supply chain campaign director at Public Citizen. “With the auto sector’s growing demand for low-emission steel and the potential for a 30 percent price premium, the U.S. steel industry should invest in green steel technologies today to meet demand and deliver cleaner air and water for communities throughout the Great Lakes region.”
This transition promises not only climate and public health benefits but also benefits to workers and local economies in steel states. According to a recent report from the Ohio River Valley Institute, transitioning to fossil fuel-free steelmaking could grow regional jobs in Pennsylvania’s Mon Valley by 27% to 43% by 2031 and save Pennsylvania $380 million in health, community, and environmental costs. Without investments in green steel, the region is expected to lose 30% of jobs in the steel sector during the same period.
The U.S. must expand its existing programs to spur a robust domestic green steel marketplace. The white paper presents several recommendations to help bridge this gap, including prioritizing near-term, time-limited federal subsidies to become competitive with European incentives per-tonne-of-iron capacity for transitioning existing DRI facilities to green hydrogen and building new green H2-DRI and other fossil-free facilities.
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