The global steel industry could eliminate carbon emissions by 2050 by investing $278 billion and using green hydrogen and recycling technologies, BloombergNEF (BNEF) has said in a report.

The report talks about how a combination of falling hydrogen prices, affordable clean power, and increased recycling could reduce emissions to net-zero while increasing production output.

The steel industry accounts for around 7% of greenhouse gas emissions annually and is one of the most polluting industries worldwide.

The report notes that governments and corporates are pushing the steel industry to reduce emissions by 2050. The decarbonization of steel is central to the net-zero aspirations of China, Japan, Korea, and the European Union.

BNEF said green hydrogen could be the cheapest production method for steel and capture 31% of the market by 2050. Another 45% could be produced from recycled material. The rest is from a combination of older, coal-fired plants fitted with carbon capture systems and innovation processes to refine iron ore into iron and steel.

According to the report, around 70% of steel is currently made in coal-fired blast furnaces, with 25% produced from scrap in electric furnaces and 5% in a natural gas-fired process known as direct reduced iron (DRI). The steel industry needs more DRI plants and electric furnaces to convert a significant portion of the fleet to hydrogen.

Julia Attwood, Head of sustainable materials at BNEF and lead author of the report, said, “The next ten years could see a massive expansion of steel capacities to meet demand in growing economies, such as India. Commissioning natural-gas-fired plants could set producers up to have some of the lowest-cost capacity by retrofitting them to burn hydrogen in the 2030s and 2040s. But continuing to build new coal-fired plants will leave producers with only bad options toward a net-zero future by 2050.”

The report suggests five actions for the sector to eliminate carbon emissions by 2050. It includes increasing the amount of recycled steel, especially in China, and producing clean energy for electric furnaces. The industry should blend hydrogen in existing coal-and gas-based plants to lower green hydrogen costs and design all-new manufacturing capacity to be hydrogen or carbon capture-ready. It must retrofit or close any remaining coal-fired plants by 2050.

The production of green steel from hydrogen and electric furnaces will need a significant amount of clean energy and a shift towards higher iron ore grades. Brazil and Russia have access to high-quality iron ore reserves and ample clean energy. Brazil is expected to have one of the lowest costs for hydrogen production by 2030, as per BNEF. India and South Africa also have significant iron ore reserves and the potential to generate a large amount of cheap and clean power.

However, Australia, the world’s largest iron ore producer, produces lower-grade iron ores. It could lose its number one place in the supply chain if it does not upgrade its product.

China, home to 57% of the world’s steelmaking capacity, will play a pivotal role, and its path to lower emission will set the direction for the industry. The country aims to focus first on enhancing recycling and energy efficiency before adopting hydrogen and carbon capture technologies.

BNEF said policymakers’ support for industrial decarbonization could decide for steelmakers. Subsidies for technologies like hydrogen and carbon capture tax credits in the pending Build Back Better Bill of the U.S. could help green steel to compete with fossil-fuel-based production.

The report said most of the costs to make green steel come from operations. Therefore, reducing green hydrogen costs is crucial, and BNEF expects the cost to fall over 80% by 2050 to under $1/kg in most parts of the world.

Researchers from the Massachusetts Institute of Technology predicted the price of green hydrogen to fall to $2.50/kg or less by 2030.

According to Rystad Energy research, the global pipeline of utility-scale green hydrogen developments- projects with capacities greater than 1 MW now exceeds 60 GW, with 87% of this capacity coming from gigawatt-scale projects.