Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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By Irina Slav – Jun 28, 2025, 6:00 PM CDT
- Europe’s push to produce low-emission steel is faltering due to the high cost of green hydrogen and unreliable, expensive electricity.
- While companies like ThyssenKrupp continue green efforts amid layoffs and cutbacks, Europe’s rearmament plans clash with its climate goals.
- The EU’s energy transition is driving up industrial costs, prompting reliance on mechanisms like CBAM to offset uncompetitive pricing
The European Union has pledged billions in rearmament spending. It also just pledged billions in higher NATO spending. Steel is a crucial part of the rearmament drive. Without it, you can’t build tanks and make weapons. But Europe does not just want any steel—it wants it green. And green steel is so expensive, companies are walking away from green steel projects in droves.
This week saw one of the world’s largest steelmakers, ArcelorMittal, ditch its plans for the conversion of two plants in Germany to green hydrogen as an energy source because the costs were exorbitant. Importantly, the German government had promised the steelmaker $1.5 billion in subsidies for the conversion projects. Still, they turned out to be too expensive.
Germany’s ThyssenKrupp, meanwhile, is sticking with its green steel plans, although it noted the “crisis” in the industry. At the same time, ThyssenKrupp is laying off 40% of its workforce and slashing production capacity by a quarter, the Financial Times reported at the end of 2024.
“The first electric arc forges are being built in countries that can offer competitive and predictable electricity provision,” ArcelorMittal said, as quoted by Reuters. “Electricity prices in Germany are high both by international standards and compared to neighbouring countries.”
There are two ways to decarbonize steelmaking, which is an important point on the EU’s net-zero agenda. One way is hydrogen, and more specifically, green hydrogen, produced through electrolysis, enabled by wind and solar power. The other way is swapping blast furnaces fueled by coal to electric arc furnaces, fueled by, once again, wind and solar. Those electric arc forges that ArcelorMittal was referring to are being built in nuclear-heavy France. Because nuclear is cheap and reliable. Wind and solar appear to be the opposite of that.
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So-called green hydrogen is several times costlier than any other variety. The reason is that electrolysis is, somewhat ironically, an energy-intensive process that uses electricity generated by wind or solar installations to split water molecules. Despite its net-zero desirability, the process cannot violate the fundamental laws of physics, meaning that the end product, in terms of energy, is considerably smaller in volume than the amount of energy expended on producing it—which is why green hydrogen’s cost is unlikely to come down anytime soon.