Decarbonizing China’s iron and steel industry: Hydrogen-based mitigation pathway and techno-economic implications

Abstract

China’s iron and steel industry is one of the nation’s key hard-to-abate sectors, contributing up to 22% of domestic carbon emissions. As clean hydrogen emerges as a promising candidate for deep decarbonization, this study outlines pathways for low-carbon steel production in China, including the comprehensive costs of this transition. Initially, four scenarios are explored, taking into account regional technological routes based on the levelized cost of electricity (LCOE) and China’s projected steel production until 2060. Each technological route specifies the proportion of hydrogen-based steel production, characterized by an annual and provincial resolution. These scenarios differ based on the geographical potential for renewable energy and the rate of adoption of hydrogen-based technologies. Subsequently, a techno-economic analysis is conducted for a virtual green steel plant, wherein a renewable-based microgrid is configured to account for the provincial levelized cost of hydrogen (LCOH) while minimizing lifecycle greenhouse gas emissions. The virtual deployment of this green steel plant is then configured to satisfy steel demand utilizing hydrogen-based direct reduction of iron. The findings suggest that the shift to hydrogen-based steelmaking in China necessitates initial investments ranging from 686 to 1,030 billion CNY, with potential reductions in carbon emissions between 5.42 and 8.13 Gt CO₂e by 2060. Finally, a strategic framework is proposed as a policy recommendation for China, emphasizing the decentralized integration of hydrogen within the steel industry. This positions hydrogen as a viable vector for achieving carbon neutrality in heavy industries.