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China’s steel industry is one of the highest sources of carbon emission in the world. But according to recent reports published by the Centre for Research on Energy and Clean Air (CREA), a major shift toward cleaner steel production could result in significant reduction in emissions by nearly 35% within 2035.
China’s Steel Industry Is Going Green, Expected to Cut Emissions by 35%
Currently, majority of the Steel produced by China is through blast furnaces which consume significant coal thereby releasing heavy carbon emission. CREA predicts a gaining prominence of Electric Arc Furnaces (EAF) over conventional Blast Furnaces, to support cleaner and effective steel making. If EAFs make up 20% of steel production by 2030, it could eliminate the need for 100 to 120 million tons of coal-based steel output — equivalent to Japan’s entire annual production.
Falling Output Helped, But It’s Not Enough
In recent years, China’s steel emissions have dropped primarily due to a general slow-down of production standards. In 2025, output fell below 1 billion tons for the first time since 2020 — a decline of 5% which resulted in a reduction of around 150 million tons of CO2, more than any government policy achieved. However, CREA warns this is not real progress, as China has already missed its 2025 green targets.
Good for Business, Too
Going green not only has its positive impact on the environment but provides financial leverage. If steel production through EAFs reaches a 20% share by 2030, industry profits could rise by 220-250 billion yuan ($36 billion), and company debt levels could fall significantly. This matters because steel companies in China took on over 1 trillion yuan ($146.5 billion) in new debt between 2020 and 2025.
Global Trade and Green Shift
Due to diminishing domestic demand in China and excess supply, the country redirected its steel exports to global markets. As a result, China’s steel exports increased sharply from 54 million tons in 2020 to 134 million tons in 2025. This led to a rise in its share of global steel trade from 13.3% to 29.2%.
However, concerns over unfair trade practices and dumping have prompted many countries to impose anti-dumping and countervailing duties on steel imports. At the same time, the European Union has introduced the Carbon Border Adjustment Mechanism (CBAM), encouraging producers to adopt greener steel production methods.
Globally, carbon-related trade regulations are becoming stricter, which may adversely impact China’s exports. In this environment, increasing green steel production will be important for maintaining competitiveness.
The message is clear: China’s steel industry must go beyond reducing output and focus on long-term structural reforms.
