The European Commission announced the approval of more than €520 million (US$557 million) in state aid for projects aimed at advancing efforts to decarbonize steelmaking by steel and mining company ArcelorMittal in Germany and Spain.

The aid measures both target the use of hydrogen to replace fossil fuels in the production of steel, and include €460 million for decarbonization projects at ArcelorMittal’s facilities in Gijon, Spain, and €55 million for a new demonstration plant in Hamburg, Germany.

Demand for fossil-free steel is expected to increase significantly, as manufacturers globally aim to decarbonize their supply chains. Steelmaking is one of the biggest emitters of CO2 globally, and one of the more challenging sectors to abate, with total greenhouse gas emissions (GHG) from the sector accounting for 7% – 9% of direct emissions from the global use of fossil fuels. The use of green hydrogen to fuel the production process is seen as one of the key potential solutions to help decarbonize the sector.

ArcelorMittal has set a commitment to achieve company-wide net zero emissions by 2050. The company has said that it is exploring multiple approaches to low-emissions steelmaking, including the use of hydrogen or circular carbon and carbon capture and storage processes.

The company has committed to share its technical know-how from the projects with other European steel producers.

The state aid in Spain will support the construction of a renewable hydrogen-based direct reduced iron plan, which, together with a new electric arc furnace, will substitute the Gijon plant’s blast furnace. Steel produced using electric arc furnace technology uses recycled ferrous scrap as the primary raw material, and does not require the smelting of virgin iron ore or the burning of coal, generating substantially lower levels of carbon emissions with less energy intensity relative to traditional blast furnace steelmaking technology.

Over time, the plant will phase out natural gas in the gas mix, to be operated using renewable hydrogen with syngas produced from waste and metallurgical gases. Ultimately the project is expected to avoid the release of over 70 million tonnes of carbon dioxide.

In Germany, the state aid in the form of a €55 million direct grant will support the construction and installation of a demonstration production facility using 100% renewable hydrogen. While the project is expected to avoid the release of over 700,000 tonnes of carbon dioxide, the main objective is to apply technology aimed at reducing greenhouse gas emissions in ArcelorMittal’s green steel production processes.

In its announcements of the state aid approvals, the European Commission noted that the projects will support several EU initiatives, including the EU Hydrogen Strategy, including plans to rapidly scale hydrogen production capabilities in Europe, as well as the the European Green Deal, the EU strategy to achieve a climate neutral economy by 2050, and REPowerEU, the EU plan to end its reliance on Russian fossil fuels. 

Commenting on the approval of the Spanish aid, Margrethe Vestager, European Commission Executive Vice-President in charge of competition policy, said:

“By using renewable hydrogen, the green steel plant will contribute to reducing emissions in an energy-intensive sector and provide valuable insights for scaling up this technology across the EU. Today’s decision supports the EU’s transition to a net zero economy in line with the European Green Deal objectives.”

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