China needs to accelerate its shift to producing steel from lower carbon-emitting furnaces in order to meet its target to produce 20 percent of its steel output from such furnaces by 2030, according to a report by the Centre for Research on Energy and Clean Air (CREA) on Tuesday, March 31.
Beijing previously set a goal to produce 15 percent of its crude steel using the cleaner electric arc furnace (EAF) process by 2025, and to raise the share to 20 percent by the end of 2030.
China’s slower-than-expected shift toward lower-carbon emission steel production has prolonged the dominance of coal-powered blast furnace-basic oxygen furnace (BF-BOF) steelmaking, while declining demand, rather than a structural shift, drove emissions reductions in 2025, the report noted.
China’s crude steel production fell below one billion mt in 2025, a drop of 4.4 percent year on year, substantially larger than reductions expected from policy targets.
To revive green steel ambitions, the report highlighted the necessity of a structural shift away from carbon-intensive BF-BOF production. Raising the electric arc furnace (EAF) share to 15-to-20 percent by 2030 could reduce BF-BOF steel production by between 80 million and 120 million mt, equivalent to Japan's annual steel output.
Under a prioritized EAF transition, steel sector emissions could fall to nearly 37 percent below peak levels by 2035, greatly outpacing China’s updated Nationally Determined Contribution (NDC) target of a 7-10 percent drop for economy-wide net emissions, the report said.
The industry is also facing mounting financial pressures. Persistent overcapacity and weak domestic demand have sharply eroded steelmakers’ profitability, with industry liabilities rising by over RMB 1 trillion between 2020 and 2025.
A prioritized EAF-based pathway of at least 20 percent by 2030 could support a recovery of profits of up to RMB 220 billion and reduce the asset-liability ratio to roughly 60-62 percent, shifting the sector to a more stable footing.
China’s share in the global steel trade surged from 13.3 percent to 29.2 percent from 2020 to 2025, intensifying its exposure to trade frictions. Enhancing the share of green steel will be crucial to strengthening the sector’s global competitiveness, especially amid tightening carbon-related trade measures, such as the EU’s Carbon Border Adjustment Mechanism (CBAM).
To strengthen credibility in climate commitments and financial liability, the report suggested aligning climate and trade policies, accelerating blast furnace phase-down, and tightening financial support for inefficient steelmakers.
On March 9, Hu Wangming, chairman of major Chinese steelmaker Baowu Group, pointed out in his proposal for the 15th Five-Year Plan that greening is an important direction for the transformation and upgrading of the manufacturing industry, as well as an objective requirement for developing new-quality productive forces and building a modern industrial system.
Mr. Hu proposed three recommendations.
First of all, China should establish a national Carbon Neutral Technology Innovation Center for the iron and steel industry, intensify research and development in low-carbon metallurgy technologies, and enhance capabilities in fundamental and frontier technological innovation.
Secondly, China should accelerate the establishment of a unified standard system for low-carbon-emission steel, and elevate the Environmental Product Declaration (EPD) platform covering the entire steel industry chain to the status of a national public service platform.
Last but not least, China should strengthen market-based incentives and guidance, promote low-carbon products, and stimulate green consumption.
