As of 2026, carbon regulations, energy prices, and certification rules are becoming the main factors shaping green steel. Instead of a unified global growth trajectory, the market is entering a period where regional strategies and competitive arenas dominate. Even in Europe, the birthplace of green steel, the market remains relatively limited, while 2026 is expected to be the first year in which much of the uncertainty is resolved and regional divergence becomes clear. Regulations, cost structures, and access to energy are transforming green steel from a global goal into a regional competitive arena.
At the center of this transformation is the European Union’s Carbon Border Adjustment Mechanism (CBAM). Effective from January 2026, CBAM will create financial obligations and require producers and importers to measure emissions with far greater precision and detail. This effectively ends loosely defined “green” labeling, making certification, traceability, and transparent emissions accounting fundamental requirements.
Cost Pressure and Market Selection in Europe
As the regulatory framework solidifies in Europe, cost pressures on producers are increasing rapidly. Although green steel premiums ranged between EUR 120–180 per ton in 2025, production costs in many projects exceed these levels. In both EAF (Electric Arc Furnace) and DRI/EAF systems, electricity can account for up to 20% of total costs. Combined with high energy prices and slow progress in renewable infrastructure investments, projects face significant challenges. Under these conditions, major producers such as Salzgitter, ArcelorMittal, Thyssenkrupp, and SSAB have had to delay or reconsider their green transition timelines.
This scenario positions 2026 as a “selection year” for Europe. Producers who adopt certification standards early, secure access to clean energy, and report emissions transparently are expected to gain a competitive edge, while others face risks both from regulatory costs and market confidence.
Structural Advantages in the MENA Region
The Middle East and North Africa (MENA) region offers structural advantages for low-carbon steel production compared to Europe. Much of the regional production is already EAF-based, keeping per-ton carbon emissions below the global average. Abundant natural gas, strong solar potential, and developing hydrogen projects position MENA as a key DRI and HBI supplier for Europe. However, the region’s focus on long steel production versus Europe’s flat steel demand limits the full utilization of this potential.
Cautious Progress in China and the U.S.
China is advancing technologically in green steel but is adopting a cautious approach to the European market due to CBAM related costs. Even though many Chinese producers have the capacity to reduce emissions by 30–40%, the EU’s implied emission costs create an additional burden of over EUR 140 per ton for Chinese steel. This restricts trade in the short term while serving as a long-term incentive for decarbonization.
In the U.S., progress is more fragmented. Federal climate policies remain relatively low on the agenda, making it difficult for green steel to gain nationwide momentum. Although production is largely EAF-based, there is no significant green steel premium in the market, and demand is shaped more by state-level incentives and voluntary corporate initiatives.
Mixed Outlook for European Projects
The pace of green steel investments in Europe varies by country. ArcelorMittal’s planned 2.3 million ton DRI project in Gijon, Spain, has been postponed, while the 2.5 million ton DRI project in Dunkirk, France, was canceled. Some EAF conversion projects in Belgium (Belval) and Germany have also been delayed.
Germany, however, is maintaining a more consistent approach. Thyssenkrupp’s DRI and EAF investments at Duisburg are targeted for 2026–2027, while Salzgitter’s SALCOS project remains a long-term transformation plan. Sweden continues to lead in hydrogen-based green steel, with HYBRIT and Stegra projects among Europe’s most ambitious initiatives despite delays.
Sourced by: Ekonomim
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