The CRU steel abatement curve shows that energy efficiency improvements are the lowest-cost steel industry decarbonisation options and require the lowest carbon price to be incentivised. Deeper emissions cuts require strong policy support and/or high steel cost premiums.
CRU has assessed six retrofit, fuel-switching and route-replacement scenarios across Europe, the USA, China and the Middle East. The results are presented on a Scope 1 basis, and the figures shown are simple averages across the regions assessed. Scrap-based electric arc furnace production is excluded because the framework assesses steel industry decarbonisation within primary steel routes rather than the relocation of scrap melting.
Steel industry decarbonisation does not begin with hydrogen
CRU’s analysis shows a clear hierarchy. Energy efficiency improvements – coke dry quenching (CDQ) replacing wet quenching is used as a proxy here – require the lowest carbon price to be incentivised. The CDQ process captures waste heat and converts it into steam, creating operational value that offsets the upfront cost.
Beyond energy efficiency, the curve rises sharply. Natural gas-based direct reduced iron and electric arc furnace (NG DRI-EAF) replacing blast furnace-basic oxygen furnace (BF-BOF) production is the lowest-cost major route-switching option. This option reduces Scope 1 emissions by ~62%. However, its ranking is highly sensitive to gas costs and the emissions boundary.
The impact of gas costs is illustrated by the required steel carbon price of ~$42 /tCO₂ in the USA, where NG is low-cost, compared with ~$188 /tCO₂ in Europe, where NG is more expensive. Including upstream NG emissions weakens the relative advantage of gas-based pathways and changes this ranking drastically. For example, accounting for Scope 3 emissions of NG used in Europe and sourced from the USA as LNG lifts the required steel carbon price for this switch further to ~$346 /tCO₂, and the overall emission-saving is reduced to only ~35%.
‘CCS retrofit’ and ‘hydrogen-based DRI-EAF replacing BF-BOF’ sit in the middle of the curve. ‘CCS retrofit’ preserves much of the existing asset base but reduces BF-BOF emissions by only ~50%, which lifts the steel carbon price required (n.b. as above, the required carbon price will be higher still and emission reduction lower if NG Scope 3 emissions are also considered). ‘H₂ DRI-EAF’ cuts emissions by ~90% but carries the fuel and technology costs of complete route replacement.
‘H₂ replacing pulverised coal injection (PCI)’ requires a high carbon price to be incentivised, while ‘H₂ replacing natural gas in DRI’ requires an even higher price. Overall, the high-cost end of the steel carbon price curve is not simply a ‘hydrogen is expensive’ story. It is about what hydrogen replaces and how much CO₂ the switch removes.
Rankings change when viewed through an ‘added cost’ lens
The steel carbon price curve (above) and the added steel cost curve (below) do not tell the same story. A carbon price measures the policy intervention required per tonne of CO₂ avoided, while an added steel cost measures the commercial burden per tonne of steel produced.
‘Energy efficiency’ remains the lowest-cost option under both measures. Beyond this, ‘H₂ replacing PCI’ has the second-lowest added cost, followed by ‘NG DRI-EAF replacing BF-BOF’ and ‘CCS retrofit’. ‘H₂ replacing natural gas in DRI’ adds the next highest costs, while complete replacement of BF-BOF with ‘H₂ DRI-EAF’ carries the greatest commercial burden.
‘H₂ replacing PCI’ appears relatively manageable on a $/t steel basis. It addresses only ~15% of integrated steel emissions so, despite a high hydrogen cost, the overall cost uplift per tonne of steel is low. However, this cost is spread across a relatively small quantity of avoided emissions, producing a high required carbon price.
The reverse applies to ‘H₂ DRI-EAF replacing BF-BOF’. It is the most expensive pathway in steelmaking terms but removes a large share of the emissions-intensive BF-BOF baseline.
Ultimately, producers will respond to steel costs while policymakers respond to carbon abatement. ‘Energy efficiency’ provides the clearest first step under both measures. On a Scope 1 basis, ‘NG DRI-EAF’ is the lowest-cost major route replacement – a conclusion that breaks down once Scope 3 emissions are accounted for. ‘CCS retrofit’ offers a more cost-effective bridge for BF-BOF producers not ready for a complete route change, but again, Scope 3 emissions would change this conclusion. ‘H₂ DRI-EAF’ remains the principal deep-abatement pathway, but will require strong policy support.
A full datapack of the regional model results, covering 2024–2050, is available to Premium subscribers of the Energy Transition and Decarbonisation service. If you want to know more about our work on abatement costs and process emissions, contact us, we’ll be happy to talk.
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