Green Steel Explained: How Low-Carbon Steel Is Changing the Industry

Steel buyers are under pressure to buy “green,” but most cannot even verify what that means. On the one hand, they want to optimise costs and secure a stable supply to retain the margins their businesses depend on.

On the other hand, they face relentless pressure to cut emissions and retain credibility with regulators, customers, and investors. So, how do they standardise sourcing strategies around carbon without losing competitiveness on price and delivery? At Metalshub, we see this shift every day.

A key way to resolve this conflict is by integrating Green Steel into the procurement strategy.

In this article, we’ll explain what Green Steel really means and why it matters now. We will also discuss how procurement leaders can balance cost efficiency with sustainability compliance.

• Green steel isn’t a new grade of steel. It’s the same product made through radically different processes, where the “green” label comes from verified reductions in carbon intensity.
• The absence of a single definition and inconsistent emissions data across suppliers make it difficult for buyers to verify how “green” a steel product truly is, since different certification standards use different thresholds.
• Global demand for certified low-CO₂ steel already exceeds supply, leading to premiums of €100–€300 per ton and forcing procurement teams to secure limited volumes early.
• New regulations like the EU’s CSRD and CBAM require companies to track, verify, and report supply-chain emissions, turning green steel procurement into a compliance necessity.

Green Steel refers to steel produced with dramatically lower carbon emissions than traditional methods due to a significant reduction in reliance on fossil fuels. Instead, cleaner alternatives are used, like electric furnaces powered by renewable energy or hydrogen-based reduction of iron ore.

Steelmaking is one of the biggest industrial polluters, accounting for roughly 8% of global CO₂ emissions. Today, around 70% of global steel production relies on the blast furnace–basic oxygen furnace (BF-BOF) route, underlining the scale and inertia of the low-carbon transition. The industry aims to cut these emissions substantially by shifting to low-carbon production routes.

It’s important to clarify that “green steel” doesn’t denote a new grade of steel, but rather how it’s made. The steel itself is physically the same; “green” indicates a cleaner process.

In conventional production, coal-derived coke is used to strip oxygen from iron ore, releasing roughly 1.8–2.2 tons of CO₂ per tonne of steel.

Green steel initiatives instead use methods that emit far less. For example, using hydrogen as the reductant produces water vapour instead of CO₂. China’s HBIS group reported hydrogen-based iron production in pilot projects with as little as 0.25 tons CO₂ per tonne (even ~0.125 tons net with carbon capture).

A “green” claim must be supported by certified, auditable data to be credible. Several certification frameworks exist today, including ResponsibleSteel, TÜV SÜD, DNV, and the Global Steel Climate Council (GSCC), which apply different thresholds and methodologies. For example, ResponsibleSteel issues site-level certifications based on broad ESG performance, with results adjusted depending on the share of scrap input. In contrast, the Global Steel Climate Council (GSCC) focuses on product-level certification, applying fixed carbon intensity thresholds aligned with 1.5°C climate targets and requiring third-party verified emissions reporting.

Procurement teams also encounter Environmental Product Declarations (EPDs) that quantify cradle-to-gate carbon footprints. The absence of an agreed global standard means buyers face competing labelling schemes, making procurement comparisons difficult and raising the risk of greenwashing.

At the core of these frameworks lies the product carbon footprint (PCF), which captures Scope 1, 2, and upstream Scope 3 emissions. This KPI must be established through a cradle-to-gate life cycle analysis (LCA) in line with internationally recognised standards such as ISO 14067, and verified by an independent third party. PCF remains the primary benchmark procurement leaders use when comparing “green” offers.

Alongside CO₂ intensity, some frameworks also integrate broader ESG factors such as human rights, water use, or circular economy practices. These considerations add a more holistic perspective to how “green” a steel product can be. However, in practice, procurement decisions today are driven first by carbon data, with other ESG metrics expected to gain weight as sustainability reporting frameworks mature.

Alongside global certification frameworks, some industry players have developed their own categorisation systems to make green steel more comparable in procurement. These initiatives highlight how definitions are still evolving and why buyers must remain cautious when benchmarking offers.

Klöckner&Co’s one-dimensional model groups steel products into five categories ranging from “Start” to “Prime,” based solely on the total PCF, including Scope 1, 2, and upstream Scope 3 emissions. Notably, Klöckner&Co excludes carbon offsetting or crediting and requires external certification. For procurement teams, this model provides a clear emissions-based hierarchy that can help compare suppliers on a consistent basis.

Image Credit: Klöckner&Co

The German Steel Federation’s (WV Stahl) two-dimensional model defines five labels (A–E) based on both the PCF and the percentage of scrap used in production. By including scrap share, WV Stahl introduces a mechanism to account for the limited availability of high-quality scrap. However, some critics argue this “punishes” steelmakers for maximising scrap use, despite scrap being one of the most effective levers for decarbonisation. For buyers, this means procurement strategies tied too closely to scrap-dependent definitions could face long-term supply constraints.

Image Credit: WV Stahl

Each approach has strengths and limitations. Klöckner&Co’s one-dimensional system is straightforward and makes emissions comparability easier, but it risks driving up scrap demand and prices. WV Stahl’s two-dimensional model accounts for scrap scarcity, yet it introduces complexity and can produce counterintuitive results where higher-emission products appear more favourable due to scrap share. These dynamics show how categorisation schemes can shape not only how offers are benchmarked, but also how market incentives evolve, whether towards short-term scrap use or longer-term investment in new production routes.

For procurement leaders, these frameworks illustrate that without a single global standard, multiple definitions will continue to circulate in tenders and supplier offers. Understanding how each scheme defines green steel is essential to making fair, apples-to-apples comparisons and avoiding misinterpretation of supplier claims.

The market for low-carbon (“green”) steel is rapidly emerging, driven by customer demand and regulatory pressure. Major end-users in automotive, construction, and machinery have announced commitments to purchase low-CO₂ steel for their products. Steel mills are under growing pressure to supply verified low-CO₂ products to meet this demand.

For instance, automakers such as BMW, Mercedes-Benz, and Volvo have pledged to use only green or carbon-neutral steel within this decade. In stainless and speciality steel, producers like Outokumpu have also committed to reducing their product carbon footprints and expanding the supply of certified low-CO₂ grades.

Table 1. (Adapted from: Reccessary)

Market indices by Fastmarkets and S&P Global now even track these “green premium” transactions. Yet, supply is still catching up to demand. In Europe, green steel demand was estimated at around 3.7 million tonnes in 2023, while actual supply was only about 1.5 million tonnes. McKinsey projects that by 2030, the EU could face a 14 million-ton yearly shortage between green steel needed and available supply.

Several pioneering companies have started scaling up low-carbon steel production, especially in Europe. Sweden’s SSAB and its partners delivered the first fossil-free steel to Volvo as noted, and plan to supply 1.3 Mt per year by 2026.

Similar moves are underway in Asia, where over half of global steel is made. China’s HBIS group produced its first hydrogen-reduced iron in 2022 and secured a 10,000-ton export order to Europe for its low-carbon steel by 2025.

In the United States, producers such as Nucor and Cleveland-Cliffs are also scaling up low-CO₂ steelmaking, leveraging the country’s high share of EAF production and incentives under the Inflation Reduction Act (IRA) to invest in green hydrogen and carbon capture.

On the trade side, regulations like the EU’s Carbon Border Adjustment Mechanism (CBAM) are poised to penalise high-CO₂ steel imports. Since October 2023, importers have already been required to report embedded emissions, and from 2026, they will need to purchase CBAM certificates, effectively adding a carbon price to conventional steel. For procurement leaders, this shifts low-CO₂ sourcing from a voluntary sustainability choice to a financial necessity.

For procurement leaders, green steel represents opportunity but sometimes causes disruption. Yet those same hurdles create space for first movers to secure supply and turn compliance pressure into a competitive edge.

Cost and the “Green Premium”

Green steel still carries a significant price uplift. In Europe today, premiums of €100–€300 per ton, often translating into 30–50% higher costs, are common for certified low-carbon grades but vary widely by product form, certification scheme, and contract terms. For CFOs, this is a tough sell, especially in a market where conventional steel prices are depressed by oversupply from China. The gap between low-cost imports and premium-priced low-carbon grades makes procurement justification even more difficult without clear mandates or compliance pressure.
Procurement teams must therefore make the case that paying the premium is not simply an expense, but an investment in long-term compliance and customer retention. With Metalshub’s digital marketplace, buyers can benchmark supplier offers on cost and verified emissions data, with information standardised across currencies, Incoterms, and production routes to enable fair and transparent comparisons.

Supply Scarcity

Even with budget approval, sourcing green steel remains difficult because demand already outpaces supply. Many buyers encounter only a handful of suppliers offering certified low-CO₂ grades, with long waitlists or limited allocations for new customers.

Metalshub helps procurement leaders overcome this scarcity by providing access to a wider pool of verified suppliers, including cross-border options.

Data and Definitions

Perhaps the most frustrating challenge is definitional. What qualifies as “green” steel varies by certifier: for example, ResponsibleSteel, TÜV SÜD, or DNV may each apply different thresholds and reporting rules. One may require less than 0.5 tonnes of CO₂ per tonne of steel, while another allows up to 1.5 tonnes.

The result is that buyers can end up comparing products with vastly different footprints as though they were equivalent. As Metalshub co-founder Dr. Sebastian Kreft has noted, procurement teams are being asked to reduce emissions but often struggle to access trustworthy product carbon footprint data from suppliers.

Metalshub directly addresses this pain point by standardising supplier data and integrating verified certificates into sourcing workflows. Buyers can compare offers on an apples-to-apples basis and track Scope 3 emissions at the material level.

Regulatory Pressure

In Europe, CSRD and CBAM are forcing companies to measure and disclose supply-chain emissions and imposing penalties on high-carbon imports. For procurement teams, meeting these requirements can feel overwhelming.
Yet those who act early turn compliance into an advantage. By sourcing through Metalshub, buyers can ensure they collect auditable data and maintain a traceable chain of custody on their purchases.

Here are a couple of strategies and actions for procurement leaders in the stainless and specialty steel sectors to stay ahead:

Integrate Emissions into Sourcing Decisions

Procurement should treat carbon footprint as a key parameter alongside price, quality, and delivery. This means requesting Product Carbon Footprint (PCF) data in RFQs and including CO₂ intensity thresholds or evaluation criteria in supplier selection.

For example, teams can set an internal policy that, all else equal, bids will be favoured (or even required) to have a verified CO₂ per ton below a certain benchmark. Over time, this bakes emissions reduction into day-to-day purchasing.
It’s important to use standardised measures. Frameworks like an EPD or ISO 19694 data can be adopted so that different supplier offers can be fairly compared on carbon metrics.

Leverage Digital Tools for Transparency

Manual spreadsheets won’t cut it for tracking emissions across thousands of tons of metal inputs. Procurement organisations should invest in digital procurement platforms or data solutions that embed carbon tracking into the purchasing workflow.

With Metalshub’s procurement solution, buyers can:

• See the carbon intensity of each offer
• Compare suppliers based on emissions
• Automatically consolidate Scope 3 emissions from all purchases.

These functions connect directly to established procurement KPIs. For instance, teams can track purchase price variance (PPV) or negotiation savings while adjusting for emissions intensity, ensuring that cost savings are assessed in parallel with sustainability goals. By using such a platform, a CPO can get an emissions overview of their raw material spend. It enables real-time decisions (e.g. choosing a slightly more expensive bid that saves 500 kg CO₂ per ton) and simplifying reporting.

Steel procurement leaders face rising costs, inconsistent data, and mounting regulatory demands. At the same time, the companies that act early are already securing limited supplies of green steel and positioning themselves for tomorrow’s markets.

At Metalshub, we combine market expertise with digital tools so procurement leaders can act with confidence, supported by data and industry best practices. Procurement teams do not need to chase suppliers for numbers or hope auditors will accept rough estimates. They can have all information (price, quality, and emissions) in one place at the moment decisions are made.

Learn more about Metalshub’s solutions for the iron & steel industry.

Is green steel available for small and medium buyers, or only large OEMs?

While early supply is often locked by major automakers and producers, smaller buyers can access certified low-carbon steel through digital platforms and cross-border procurement channels.

Does green steel perform differently from conventional steel?

No. Green steel has the same mechanical and chemical properties as traditional steel. The difference lies in the production process and verified emissions data.

What role does scrap recycling play in green steel?

Scrap is critical for lowering carbon intensity. High scrap-content electric arc furnaces significantly reduce emissions. However, scrap supply is finite: around 600 Mt of scrap is used globally each year, compared with roughly 2,000 Mt of total steel demand. This constraint means that scrap alone cannot deliver the full transition, and new low-CO₂ primary routes will be required.