Green steel needs permanent subsidies to compete, report finds, as Sweden's Stegra teeters

• S-Curve Economics report says green steel cannot compete without permanent subsidies due to higher energy costs and Chinese competition facing no comparable carbon pricing
• Stegra (formerly H2 Green Steel), backed by billions in state-linked financing for its Boden plant, faces serious financial difficulties despite being a cornerstone of Sweden's green industrial strategy
• SSAB insists its fossil-free steel is economically viable, pointing to the EU Emissions Trading System as the mechanism that closes the cost gap
• The steel industry produces more CO₂ than global aviation, yet the decarbonisation bill lands on European taxpayers and consumers while Chinese steelmakers face no equivalent costs

The global steel industry cannot eliminate its carbon emissions without state subsidies — not as a temporary bridge, but as a permanent feature of the market. That is the conclusion of a report from the think tank S-Curve Economics, covered by Sveriges Radio. The finding lands squarely on Sweden, where two of the world's most ambitious green steel ventures are at very different stages of financial health.

Steel production generates more CO₂ than the entire global aviation industry. Replacing coal-fired blast furnaces with hydrogen-based processes — the core technology behind both SSAB's HYBRIT initiative and Stegra's planned plant in Boden, Norrbotten — requires enormous quantities of fossil-free electricity and green hydrogen, both of which cost significantly more than the coal they replace. The S-Curve report argues that this cost gap will not close on its own, not even with carbon pricing, because Chinese steelmakers operate under no comparable emissions regime. Europe's green steel producers are, in effect, competing with one hand tied behind their backs while their governments hold the rope.

The divergence between Sweden's two flagship projects is instructive. SSAB, the established steelmaker, maintains that its fossil-free steel is economically viable and points to the EU Emissions Trading System (EU ETS) as the decisive mechanism. As carbon permit prices rise, conventional steel becomes more expensive, narrowing the gap. SSAB has the advantage of an existing customer base, established infrastructure, and decades of operational knowledge. Stegra — the startup formerly known as H2 Green Steel — has none of these. It was supposed to build a massive greenfield hydrogen steel plant in Boden, creating thousands of jobs in a region that has staked its economic future on the green transition. Instead, Stegra is now in serious financial trouble. The company has struggled to secure financing on viable terms, and the project timeline has slipped repeatedly. The jobs promised to Norrbotten remain largely theoretical.

The Swedish state's exposure is not trivial. Stegra's financing structure has involved state-linked entities and public guarantees. If the project fails or requires restructuring, Swedish taxpayers will absorb losses on a venture that private capital markets were already pricing as high-risk. The broader question is whether the EU carbon market can actually deliver a price signal strong enough to make green steel competitive without additional handouts. The EU ETS price has fluctuated considerably; it peaked above €100 per tonne in early 2023 but has since fallen back. For SSAB's argument to hold, carbon prices need to stay high and keep rising. For Stegra's business model to work, they need to be even higher — or the subsidies need to flow indefinitely.

Germany offers a preview. German steelmakers attempting similar transitions have hit the same wall: high energy costs, unreliable hydrogen supply chains, and relentless competition from Chinese producers who benefit from cheap coal power and state-directed industrial policy unconstrained by emissions targets. Berlin has responded with billions in direct subsidies to ThyssenKrupp and others, essentially nationalising the cost of decarbonisation while the product competes on a global market that does not price carbon.

Sweden's political class has framed the green steel transition as both a climate imperative and an economic opportunity — the idea that first movers will capture premium markets. The S-Curve report suggests a less flattering reading: first movers capture premium costs, and someone has to keep paying. SSAB may yet prove the optimistic case, but its success depends entirely on a political construct — the EU ETS — delivering prices that Brussels can sustain against industrial lobbying and recession fears. Stegra's Boden plant, meanwhile, was supposed to be producing steel by 2025. The site remains largely empty.

Sources: Sveriges Radio Ekot