The decarbonization of China's steel industry and the global emissions trajectory

The decarbonization of China's steel industry dictates the global emissions trajectory of heavy industry. China manufactures over 55% of global crude steel and produces 60% of worldwide iron and steel CO2 emissions. Hydrogen direct reduced iron coupled with electric arc furnaces (H2-DRI-EAF) can deliver an 80% to 95% reduction in plant-level emissions compared to incumbent coal blast furnaces. Two recent publications, one by Shuang Xu et al (Energy Reports Volume 16, December 2026, 109564) and another by Alberto Boretti (International Journal of Hydrogen Energy Volume 263, 26 August 2026, 156863), both analyses agree that technological viability is governed by upstream power infrastructure rather than furnace-level engineering.

Their strategic logic tenses, however, on the structural mechanism required to supply that low-carbon electricity. Boretti evaluates the problem at macro-geopolitical scale, arguing that China's centralized state-capitalist model and baseload nuclear expansion (e.g., such as 11.9 GW of CAP1000 capacity built for $27.4 billion) enable levelized hydrogen costs below €1.50/kg, insulating the sector from democratic permitting delays and subsidy volatility. Conversely, Xu relies on provincial-level optimization through the NESAP-Iron model, demonstrating that industrial scale alone risks cross-sector carbon leakage. Xu quantifies that electrifying ironmaking on a coal-heavy grid increases aggregate emissions until the non-fossil power generation threshold strictly exceeds 40%.

Reading these assessments together establishes that competitive green steel cannot rely merely on aggregate national hydrogen quotas. Xu proves that relocating steel capacity to renewable-dense western provinces cuts sector emissions by 42% to 72%, while reducing emissions costs by 23% and fuel expenses by 9%. Boretti frames Western carbon border adjustments (CBAM) as a demand guarantee for Chinese output, but Xu’s modeling reveals that capturing that advantage requires spatial co-location of DRI shafts with ultra-cheap regional renewables, rather than expanding existing coastal blast-furnace clusters with unverified grid-mix electrolysis.

How the papers connect: Boretti supplies the macro industrial rationale and sovereign capital cost assumptions that underpin the large-scale equipment build-out Xu models computationally. Xu provides the quantitative spatial resolution missing in Boretti, proving that the €1.00–1.50/kg hydrogen costs Boretti anticipates are achievable only through deliberate inter-provincial capacity relocation to renewable resource bases.

What would close the gap: Neither study couples empirical ultra-high-voltage (UHV) power transmission tariff structures with provincial green hydrogen pipeline transport economics to determine whether electrons or hydrogen molecules should move across Chinese regions. A unified dynamic optimization combining hourly renewable curtailment curves, nuclear baseload dispatch, and iron ore transport logistics would definitively resolve whether steelmakers should relocate or pipe pink hydrogen to coastal blast-furnace belts.

Although modelling is a very important tool, it is often far from getting even close to the reality and being able to get exogenous factors, specially those related to policy and political force dynamics.