The Role of Hydrogen in Decarbonizing U.S. Iron and Steel Production

Abstract

This study investigates the role of hydrogen as a decarbonization strategy for the iron and steel industry in the United States (U.S.) in the presence of an economy-wide net zero CO₂ emissions target. Our analysis shows that hydrogen-based direct reduced iron (H₂DRI) provides a cost-effective decarbonization strategy only under a relatively narrow set of conditions. Using today’s best estimates of the capital and variable costs of alternative decarbonized iron and steelmaking technologies in a U.S. economy-wide simulation framework, we find that carbon capture technologies can achieve comparable decarbonization levels by 2050 and greater cumulative emissions reductions from iron and steel production at a lower cost. Simulations suggest hydrogen contributes to economy-wide decarbonization, but H₂DRI is not the preferred use case for hydrogen in most scenarios. The average abatement cost for U.S. iron and steel production could be as low as $70/tonne CO₂ with existing technologies plus carbon capture, while the cost with H₂DRI rises to over $500/tonne CO₂. We also find that IRA tax credits are insufficient to spur hydrogen use in steelmaking in our model and that a green steel production tax credit would need to be as high as $300/tonne steel to lead to sustained H₂DRI use.