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After several years of announcements, pilot projects and branding exercises, green steel still remains a niche market, even in Europe – where the decarbonization movement has begun.
But 2026 is shaping up to be the first year when green steel ambitions meet a transformed policy environment and an unforgiving market reality. The introduction of the Carbon Border Adjustment Mechanism (CBAM) in January 2026 in the EU is expected to be a watershed moment – one that forces clearer definitions, shifts cost structures, and begins to separate early winners from laggards.
While Europe is pushed by regulation, Asia is driven by cost and technology pragmatism, and the Middle East positions itself as a strategic supplier of ultra-low-emissions steel and raw materials. The US, meanwhile, enters a period of uncertainty as the new administration signals a shift away from federal green-industry goals, creating a more fragmented landscape where state-level incentives and corporate demand – rather than national policy – will shape the trajectory of low-carbon steel. Together, these regions will define the competitive landscape for green steel over the next several years.
Fastmarkets has done a forward-looking preview of what to expect in 2026 for the green steel market globally, along with the key challenges and opportunities as some regions move from green steel storytelling to measurable decarbonization.
For Europe, the ambiguity around green steel will become increasingly difficult to sustain. The introduction of the CBAM will force producers and importers to quantify emissions with unprecedented precision.
With CBAM payments becoming financially material, the market can no longer operate on loosely defined green branding or mass-balance accounting. Instead, Europe will be pushed toward a more consistent emissions-intensity threshold, covering Scope 1, 2 and, increasingly, Scope 3. This will bring Europe closer to emerging frameworks abroad, including India’s 2024 star-rating system and the rules emerging in different regions for “clean” materials.
In this context, the need for a harmonized certification and “green steel” label that aims to bring transparency and credibility to the market becomes crucial. Without credible supply-side labeling and traceability, Europe risks undermining trust in green steel – which could discourage procurement and investment.
Initiatives for certification standards, like the one led by Low Emission Steel Standard (LESS) or Responsible Steel therefore become particularly relevant.
If LESS or a similar standard gains broad acceptance in Europe – including among producers, buyers, and regulators – 2026 could mark the birth of credible “lead markets” for low-emission steel. Large institutional buyers (automakers, construction firms etc.) will demand certified emissions data, not marketing claims. That could make low-emission steel the new baseline for “responsible sourcing.”
So far, European steelmakers have found it challenging to charge premiums for green steel owing to a lack of willingness to pay among buyers and a lack of consumer awareness of green steel.
The lack of common standards, even for the definition of “green steel”, slowed its uptake in the market, sources said.
“There is a lack of awareness [of green steel] from buyers in some regions,” a mill source said. “Sometimes we get ridiculous requests. It is clear they have no idea of what they need.”
Fastmarkets’ methodology defines European green flat steel as “steel produced with Scope 1, 2 or 3 emissions at a maximum of 0.8 tonnes of CO2 per tonne of steel.”
Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, meanwhile, was set at €100-170 ($117-199) per tonne on January 2, unchanged from December 24.
In 2025, green steel premiums for flats have remained relatively stable, fluctuating within a narrow band of roughly €120-180 per tonne. The premium has been showing only modest week-to-week volatility. Despite movements in underlying base steel prices, the green premium itself has not shown major directional shifts and has instead held within the same range throughout the year. This suggests a broadly steady market perception of the green surcharge rather than strong upward or downward pressure in 2025.
Overall, the decarbonization shift in Europe remains quite “painful” for steelmakers, despite state funding.
“Even with strong policy backing and potentially rising demand due to regulatory changes, producing green steel is expensive and difficult to scale-up,” a mill source in Europe said.
Regulatory uncertainty and deteriorating economic conditions have led several European steelmakers to revise their decarbonization strategies, Fastmarkets reported – for example:
Salzgitter delayed implementation of its Salcos green project.
ArcelorMittal canceled on the construction of direct reduced iron (DRI) modules, even with government funding.
Thyssenkrupp has put a hydrogen tender for its green steel plant on hold due to elevated prices but said it remains committed to the Duisburg site’s green transformation.
SSAB postponed the start date for its Lule green project from the end of 2028 to the end of 2029 because of technical challenges – notably, delays in the modernization of the national power grid that will supply electricity to the facility.
Switching to electric-arc furnaces (EAFs) and EAFs/DRIs implies a steep increase in electricity requirements. SSAB estimated that electricity usage would rise significantly, demanding greater supply of fossil‐free power.
Electricity accounts for less than 4% of the costs in the BF-BOF production route. For EAF mills, electricity can be around 20% of the total, industry sources estimated.
The first wave of DRI/EAF projects has already faced increasing pressure relating to raw materials availability and energy pricing. DR-grade pellet, high-quality scrap, and reliable renewable electricity remain critical constraints for scaling low-carbon output. Europe’s energy transition delays – slow permitting for renewables, elevated electricity costs, and underdeveloped hydrogen infrastructure – will make 2026 a challenging year for many plants seeking full certification and compliance.
In such circumstances, decoupling energy-intensive ironmaking from steelmaking has become an omni-present discussion point.
Importing hot-briquetted iron (HBI) and DRI from origins such as the Middle East-North Africa region (MENA), where HBI/DRI production is more commercially viable, was one possible scenario in coming years.
Despite all the challenges, the opportunity remains real. CBAM phasing in, along with phasing out of free carbon permits under the EU Emissions Trading System (ETS), will give potentially compliant producers a structural price advantage over BF-BOF imports. Combined with a credible low-emission steel standard like LESS or Responsible steel, European producers who secure “clean” raw materials, renewable energy, and transparent emissions accounting could build a strong market position.
As a result, 2026 promises to be a moment of “sorting” for European steel: companies and projects that align early with emissions-based certification and clean energy strategies will gain first-mover advantages; others risk being left behind, exposed to both regulatory costs and eroding market trust.
The Middle East-North Africa region holds the strongest position among all regions when it comes to low-carbon steel production.
The region’s steelmaking industry, being comparatively recent, is almost 100% represented by EAF-based mills, their CO2 emissions being below one tonne per one tonne of steel produced versus the global average of 1.9 tonnes of CO2 per tonne of steel produced.
On top of that, MENA has abundant gas reserves, and great potential for renewable energy – particularly solar, and the push for the potential of green hydrogen, which would allow cutting of CO2 emissions even further.
Additionally, the region enjoys a favorable geographical position thanks to relatively close access to Europe and Asia as well as reasonably developed port infrastructure.
But despite all these benefits, the region cannot fully enjoy them since the European region – the only one that currently shows interest in steel with a low carbon footprint – mainly needs flat products, whereas MENA is largely concentrated on production of long steel.
“If you go into the data of European imports, they import 38 million-42 million tonnes [per year] roughly and 90% or more of that is flat products. The MENA [region] produces mostly long products, but [Europe] does not need long products,” Rajesh Singh, general manager at United Iron and Steel said during Fastmarkets’ Middle East Iron and Steel Event (MEIS) held in Dubai in November.
And, in 2026, long steel imports into Europe are projected to shrink once the new trade regime cutting foreign steel supply by around 50% comes into force.
Under the new regime, only 844,526 tonnes of rebar and 1.56 million tonnes of wire rod will be able to enter the union free of a 50% duty.
“Thus, we cannot use this good positioning that we have in terms of low emissions,” said Ramy Saleh, chief business development & sustainability officer at El Marakby Steel.
According to Saleh, the MENA region could capitalize on steel sections and sheet piles as well as various downstream products.
Additionally, the region could potentially go downstream once European mills switch to EAF-based production since it is one of the largest DRI producers in the world.
In 2024 the region (excluding Iran) produced 28.55 million tonnes of DRI, according to Worldsteel, while overall steel output was 43.7 million tonnes.
Nevertheless, some of the region’s key producers repeatedly mentioned that it would be better to sell products with high added value rather than raw materials.
China is advancing its production and export of green steel, with many mills now able to reduce carbon emissions by 30-40% compared with the traditional BF-BOF process, which typically emits 1.8-2.2 tonnes of CO2 per tonne of crude steel.
Several steel producers are already manufacturing products that meet the CBAM carbon emission benchmarks.
For example, HBIS Group has utilized hydrogen metallurgy to produce green steel, exporting its first batch of green steel slabs to European buyers in 2025. Similarly, Baowu Steel supplied green rebar for a low-carbon construction project in Shanghai. Although volumes were modest, industry observers noted that this demonstrates the capability of Chinese mills to produce a range of green steel products in response to market demand.
China also benefits from a substantial supply of green electricity, which supports environmentally friendly steel production, particularly at electric-arc furnace (EAF) mills.
As of the end of 2024, the cumulative installed capacity of new energy power generation in China reached 1.41 billion kilowatts, a year-on-year increase of 33.9%, accounting for 42% of the total installed capacity in the country. In 2024, China’s new energy power generation reached 1.84 trillion kilowatt hours, a year-on-year increase of 25%, according to China’s National Energy Administration.
Furthermore, the Chinese government has finalized the carbon emission allowance allocation plan for the steel sector under the national ETS for 2024-2025, enabling producers to trade carbon credits. This mechanism is expected to promote green steel production by allowing mills to offset a portion of their costs through the sale of surplus carbon quotas.
Nevertheless, concerns persist regarding high CBAM-related expenses. The European Commission sets China’s default emissions value for hot-rolled coil (HRC) under CBAM at 3.187 tonnes of CO2 per tonne, leading to an estimated cost of €145.46 per tonne according to Fastmarkets’ data.
“This cost will undermine the competitiveness of Chinese green steel in the European market, hindering the mass production of the product,” an exporter based in China said.
“The carbon emission benchmarks for Chinese steel products are lower than we previously expected, which could be a challenge for most Chinese steelmakers for now,” a Chinese mill source said.
Higher costs caused by the launch of CBAM in Europe from 2026 will likely constrain trade flows of Chinese steel into the European market in the near term; in the longer-term, this, coupled with the Chinese government’s decarbonization push, is expected to help facilitate the green development of the Chinese steel industry, a second Chinese mill source said.
Fastmarkets’ fortnightly price assessment of flat steel reduced carbon emissions differential, exw China, which calculates the premium for flat-rolled reduced carbon emissions steel over products produced from the traditional blast furnace-based route, came in at 0-500 yuan ($0-71) per tonne on Monday January 5 2026, unchanged since June 20.
The corresponding assessment of flat steel reduced carbon emissions, daily inferred, exw China was 3,260-3,770 yuan per tonne on Monday January 5, with the range moving down by 10-30 yuan from 3,270.00-3,800.00 on December 31.
When Donald Trump began his second term as President of the United States on January 20 2025, it was clear that his administration’s policies would veer sharply away from his predecessor Joe Biden’s.
Trump had run his campaign on the promise of putting ‘America First’, and the country’s turn away from making climate-conscious policies was a natural consequence of this, one that has put decarbonization and the green steel movement on the back foot.
For example, Trump’s One Big Beautiful Bill Act (OBBBA) made it harder for solar and wind energy projects to qualify for federal tax credits and repealed several Inflation Reduction Act (IRA) incentives such as those for electric vehicles (EVs) and residential energy products.
During his address to the United Nations General Assembly (UNGA) on September 23, Trump dismissed climate change as “the greatest con job ever perpetrated on the world” and a “hoax made up by people with evil intentions.” He also called green energy a “scam” and took aim at wind farms and environmentalists.
“You need strong borders and traditional energy sources if you’re going to be great again,” Trump said during his address. “I worry about Europe; I love the people of Europe. I hate to see it being devastated by energy and immigration,” he added.
It is unsurprising that, in the current political climate, green steel initiatives are not picking up steam.
US steel market participants have often expressed the opinion that steel made in the US is “cleaner” than production methods elsewhere, as more than 70% of production is through electric-arc furnaces (EAFs).
EAF steel production emits lower levels of carbon, while production via blast furnaces, which rely on coal, emits higher CO2 levels.
Fastmarkets’ weekly green steel domestic, differential to US HRC, fob mill was flat at $0 per short ton on Wednesday December 31, unchanged since the differential was launched on May 22, 2024.
Fastmarkets’ carbon threshold is 0.7 tCO2e per one tonne of steel produced. Renewable energy credits and mass balancing can be used for carbon calculation, but carbon-offset credits are explicitly disallowed.
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