Germany has committed more state aid to the development of low-carbon steel than any other country, followed by France, Belgium and the Netherlands, according to a study published by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science.
The report finds that Germany has committed around €7 billion to low-carbon steel projects, placing it well ahead of other countries in terms of project-level support. While Japan has announced substantial backing for steel decarbonisation through its Green Innovation Fund, the study notes that committed support at the project level remains lower than in several European countries, despite Japan’s steel sector accounting for about 14% of national carbon dioxide emissions.
According to the author, Sangeeth Selvaraju, the concentration of support in Europe reflects the region’s climate ambitions and the scale of public intervention required to decarbonise steel production. He writes that “support is likely to continue as states strive to stem the exodus of many steel firms from the European market and the widespread withdrawal from low-carbon steel projects”.
The steel sector is responsible for an estimated 7–9% of global greenhouse gas emissions, making it one of the most difficult industries to decarbonise. In India and South-East Asia, steel accounts for around 12% and 15% of annual greenhouse gas emissions respectively, while in Germany the sector contributes roughly 7% of national emissions.
The study highlights a gap between policy announcements and financial commitments in several countries. “The data reveals a significant gap between policy announcements and actual financial commitments in most countries,” Selvaraju notes. While India has announced support schemes worth around ₹15,000 crore for steel decarbonisation, the report finds that committed project-level funding remains limited as of 2025.
Global demand for steel is expected to remain broadly flat, with growth concentrated in a small number of countries. At the same time, the sector is facing overcapacity, largely driven by China, which has put pressure on profitability for steelmakers across Europe and Asia. The report notes that most future capacity expansion is likely to occur in developing economies, particularly India, driven by domestic demand and projected economic growth.
Selvaraju warns that without a shift away from conventional steelmaking in these markets, global emissions reductions will be limited. “If the expansion of steel capacity in these countries is left to conventional steelmaking, the vast subsidies in other markets for the noble mission of mitigating steel sector emissions will have little effect on global steel emissions,” he said.
The report also raises concerns about transparency in China, stating that “Chinese state subsidies to steel firms remain very opaque”. While China has announced several low-carbon steel projects, the scale of public support at national and provincial levels remains unclear.
Among its recommendations, the study calls for the creation of an international fund to support breakthrough low-carbon steel projects, anchored by Japan and the European Union. It also suggests strengthening partnerships with emerging market and developing economies to support low-carbon ironmaking and integrate Asian producers into global supply chains.
“There is an opportunity to decarbonise the steel sector in Europe and developing countries, but it requires global action and ambition,” Selvaraju said. “As old steel plants come to the end of their life or conventional carbon-intensive steel-making technologies need to be retrofitted, we have a real opportunity to not bake in the dirty and destructive industry of the past. Our research shows that certain countries in Europe have started the process of trying to green the steel industry, but they must go further. It’s also paramount India and the rest of the developing world don’t put off action on low-carbon steel.”
