The world’s first industrial-scale plant for green steel promises a cleaner future

Some of those carmakers – including Volvo, which will buy from Stegra and rivals SSAB——Cars made of green steel are being marketed as “fossil-free”. And, since cars and trucks also have many parts that are much more expensive than the steel they use, spending more steel on automakers only adds a tiny bit to the cost of the vehicle—perhaps a few hundred dollars or less, according to some estimates. Many companies have also set internal targets to reduce emissions, and purchasing green steel can bring them closer to those targets.

Stegra’s business model benefits in part from the EU’s unique economic conditions. In December 2022, the European Parliament approved the imposition of tariffs on imported carbon-intensive products such as steel, called the Carbon Border Adjustment Mechanism (CBAM). Starting in 2024, the law requires companies that import iron, steel and other goods to report the carbon emissions associated with these materials.

Starting in 2026, companies will have to start paying fees proportional to the material’s carbon footprint. Some companies are already betting that this will be enough to make Stegra’s 30% premium worthwhile.

Charlotte Unger, a researcher at the Potsdam Institute for Sustainability in Germany, said that while the law could incentivize companies within the EU and importing steel to Europe to decarbonize, green steel manufacturers may also need subsidies to cover the costs of scaling up. For its part, Stegra will receive €265 million from the European Commission to help build the factory; it also received €250 million from the EU’s Innovation Fund.

At the same time, Stegra is working to reduce costs and increase revenue. Chief digital officer Olof Hernell said the company has invested heavily in digital products to improve efficiency. For example, semi-automated systems will be used to increase or decrease electricity usage based on fluctuations in grid prices.

Stegra realized there was no sophisticated software to track the emissions the company produced at each step of the steelmaking process. As a result, it is developing its own carbon accounting software, which will soon be sold as part of a new spin-off company. This type of accounting is important to Stegra because “we demand a pretty high premium that can only be achieved within the promise of a low carbon footprint,” Hoenel said.