1、Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implication2022.08rmi.org/2Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationAuthors and AcknowledgmentsAuthorsShuyi LiTing LiGuangyu TanYujun XueAuthors listed alphabetically.All authors

2、 from RMI unless otherwise noted.ContactsYujun Xue,yxuermi.orgRMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow interested parties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.http

3、s:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.About RMIRMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5C future and secure a clean,prosperous,zero-carbon future fo

4、r all.We work in the worlds most critical geographies and engage businesses,policymakers,communities,and NGOs to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030.RMI has offices in Basalt and Boulder,Colorado;New York City;Oakland,Cali

5、fornia;Washington,D.C.;and in Beijing,Peoples Republic of China.Copyrights and CitationAcknowledgments Shuyi Li,Ting Li,Guangyu Tan,and Yujun Xue,Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implication,RMI,2022RMI thanks Growald Climate Fund for the support of this re

6、port.rmi.org/3Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationAuthors and Acknowledgments 2Introduction European Policies on Hydrogen-Based Steelmaking:5 Multi-Stage and Multi-Prospect Coverage Chinese Policies on Hydrogen-Based Steelmaking:8 Guidance by High-L

7、evel Policies with Expanding Coverage Characteristics and Policy Implications of Chinas 12 Steel Industry Comparison of Clean HydrogenBased Steelmaking 16 Development Models in China and Europe,and Outlook of the Chinese Industry Development Policy Recommendations 19Endnotes 21Table of Contents4rmi.

8、org/4Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationThe steel industry accounts for nearly 10%of global carbon emissions and 17%of Chinas total.The timeline and roadmap for decarbonization of the steel industry is crucial for the low-and zero-carbon transition

9、 across the global economy.Technically,clean hydrogenbased steelmaking is a zero-carbon solution that has the potential to reach parity with traditional steelmaking routes.Clean hydrogenbased steelmaking pilot and large-scale developments need effective policy support and best practice guidance.In E

10、urope,government funding to support hydrogen-based steelmaking currently covers a wide range of project stages.In China,a series of high-level policies has been put forward to support hydrogen steelmaking technology R&D,alliance establishment,pilot and demonstration,and capacity replacement.This rep

11、ort compares the characteristics of clean hydrogen steelmaking policies in China and Europe,analyzes and estimates the development mode of hydrogen-based steelmaking in China based on local industry features,and provides relevant policy recommendations for promoting the development of clean hydrogen

12、based steelmaking.Introductionrmi.org/5Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationAlthough the European steel industry has a long history of development,its current production capacity growth is limited,with crude steel production stable at 200 million ton

13、s per year.Europe started early in the innovation of the steel production process and is leading the world with respect to the R&D level and project progress of clean hydrogenbased steelmaking.Europe has a mature policy environment for new technologies that will support continuous breakthroughs in c

14、lean hydrogenbased steelmaking,reduce carbon emissions from the steel industry,and drive the achievement of European climate targets.At present,Europe is providing comprehensive policy support for decarbonization technologies in the steel industry represented by clean hydrogenbased steelmaking from

15、multiple aspects,such as target setting,financial support,demand cultivation,and carbon emissions standards.Regarding target setting,Europe has created phased requirements for carbon emissions reduction targets in the steel industry.At the industry level,in line with the European Unions(EUs)climate

16、targets,the European Steel Association(Eurofer)has proposed a 30%reduction in carbon emissions by 2030 and an 80%95%reduction by 2050,based on the 2018 level.At the project level,the Clean Steel EU Partnership will build industry-level demonstration projects with 80%carbon emissions reduction by 203

17、0.This partnership is expected to make significant project progress for clean hydrogenbased steelmaking over the next 10 years.In terms of financial support,the EU has set up multiple programs to support green technologies such as clean hydrogenbased steelmaking,which can achieve the full life cycle

18、 of decarbonization of the steel industry,from development trials to large-scale application(see Exhibit 1).Exhibit 1Supporting funds targeting green steel industry in the EU Green transitionMulti-sectorsRegional impactConcept Pilot Demonstration Scale-up CommercializationRelevance to green steelEU

19、Clean Steel PartnershipSustainable Process Industry through Resource and Energy EfficiencyInnovation FundJust Transition MechanismRecovery and Resilience FacilityInvestEU FundProject stageNote:The EU Clean Steel Partnership fund focuses on the R&D phase of the project but will also help apply cuttin

20、g-edge technologies to the production of clean steel and lead to large-scale demonstration projects by 2030.Source:RMI analysisEuropean Policies on Hydrogen-Based Steelmaking:Multi-Stage and Multi-Prospect CoverageSteel industryProcessindustryClean HydrogenBased Steel in China and Europe:Policy Deve

21、lopment and Chinas Implicationrmi.org/6Projects at the early proof-of-concept and pilot stages can be supported by the EU Clean Steel Partnership and the Sustainable Process Industry through Resource and Energy Efficiency(SPIRE).The EU Clean Steel Partnership is an incentive program tailored to the

22、steel industry,with 700 million euros of government funding to support the maturation of low-carbon technologies in the steel industry,while SPIRE is providing early-stage research funding for low-carbon technologies in the processing industry sector,including the steel industry.For projects that ha

23、ve completed a small-scale pilot and begun the demonstration and scaling-up stages,the Innovation Fund can effectively support their advancement and technology maturity.The fund covers a wide range of low-carbon technology applications,with energy-intensive industries as an important component.The f

24、und will provide 18 billion euros between 2021 and 2030 to support commercial trials of low-carbon technologies such as clean hydrogenbased steelmaking.The Hydrogen Breakthrough Ironmaking Technology(HYBRIT)project,operated by Swedens SSAB and other partners,received 140 million euros from the Innov

25、ation Fund in 2022 to advance its demonstration for clean hydrogenbased steelmaking.The European Unions Recovery and Resilience Facility(RRF)and the InvestEU Fund provide sector-wide financial support for projects in later stages of commercialization.This process supports green technologies includin

26、g clean hydrogenbased steelmaking,and at least 37%of the RRF funds are invested in green development.The RRF can support the REPowerEU plan,an important part of which is the reduction of industrial fossil fuels use.Meanwhile,the InvestEU Fund counts sustainable infrastructure as one of its four fund

27、ing priorities.Designers of the hydrogen pipeline infrastructure required for clean hydrogenbased steelmaking can apply for the Projects of Common Interest(PCI)certification,and thus obtain priority status in the EU funding application.PCIs project list includes key cross-border energy infrastructur

28、e projects and is regularly updated.PCI aims to establish an integrated internal EU energy market and help achieve the EUs energy and climate goals.PCI-certified projects can apply for the support of Connecting Europe Facility.In addition,the newly revised Important Projects of Common European Inter

29、est(IPCEI),compatible with the EUs state aid system,became effective at the beginning of 2022.IPCEI supports public funding for emerging technologies,taking into account the latest EU policies such as the Green New Deal and the Industrial Strategy.In March 2022,62 hydrogen projects in the chemical,s

30、teel,and transportation sectors,including GET H2,were listed in Germany under IPCEI,and these projects will be supported by a total of 8 billion euros of public investment.Salzgitter AG,a partner in the GET H2 project,will begin using GET H2 hydrogen to reduce carbon emissions from steelmaking in 20

31、26.From the perspective of demand cultivation,demand for green products from downstream construction and automobile industries will also prompt steel manufacturers to develop green production technologies such as clean hydrogenbased steelmaking.The EU has also focused on downstream industries to cre

32、ate market demand for green steel and help mitigate the green premium of steel manufacturers.The demand for steel in the construction engineering industry accounts for about 50%of the total demand in Europe,and upstream structural steel emissions of the construction industry is an important part of

33、construction environmental attributes.The EU amended the Construction Products Regulation,which aims to provide legal and regulatory support for improving the environmental attributes of construction products and reducing their carbon footprint and was adopted in March 2022.The building materials in

34、dustry has set up partnerships such as SteelZero to help members achieve the goal of fossil-free steel,which has prompted construction companies such as BHC,Bourne Group,and Lendlease to join.Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/7In the autom

35、obile industry,although governments have not yet imposed mandatory measures,companies are already planning to use green steel.Volkswagen,Volvo,Mercedes Benz,and BMW are all trying to use fossil-free or hydrogen-based steel for auto manufacturing,or are participating in the clean hydrogenbased steelm

36、aking industry by investing in zero-carbon steelmakers.In addition,under the guidance of the zero-carbon target,the EU also has established an integrated system from multiple aspects such as emissions standards,market mechanisms,and carbon leakage in trading to implement carbon emissions requirement

37、s for the steel industry.The EU has established accounting rules and standards for carbon emissions for the steel industry to measure life-cycle emissions.The mature EU ETS market is an effective tool to reduce greenhouse gas emissions and promote economic competitiveness of low-carbon technologies

38、such as clean hydrogenbased steelmaking.As a carbon financial tool,Carbon Contracts for Difference(CCfD)can effectively reduce industrial enterprises concerns about the uncertainties of the ETS carbon price future trend.Governments or institutions purchase carbon emissions reduction credits from ind

39、ustrial enterprises at a fixed price to help industrial enterprises quantify the financial model of low-carbon projects,reduce the risk of industrial transformation,and make investment decisions to promote industrial low-carbon projects.At present,CCfD has been adopted widely in the industrial decar

40、bonization policy systems of the EU and its member states.CCfD-related planning has been incorporated in Germanys National Hydrogen Strategy.Furthermore,as a mechanism to avoid carbon leakage from international trade of heavy industries,the carbon border adjustment mechanism(CBAM)provides a guarante

41、e for the comprehensive low-carbon transformation of heavy industries.CBAM will apply to steel,cement,and other products.At the national level in Europe,countries like Germany,the United Kingdom,Sweden,and Italy each have taken actions in clean hydrogenbased steelmaking,mainly with project-level fin

42、ancial support.Germany is one of the few countries that have established plans for clean steel at the national level,with the Steel Action Concept issued in 2020 clearly creating a deployment plan for technology applications such as clean hydrogenbased steelmaking.The UK has launched the industrial

43、decarbonization strategy,listing the steel industry as one of the keys.Austria,Spain,and Sweden provide more support at the project level,using funds from environment or energy departments to help commercialize clean steel projects and attract financing support from the capital market.In addition,th

44、e EU and member states have taken regions with backward production capacity into consideration and provided targeted supportive policies in the process of green transition.The Just Transition Mechanism provides economic recovery and transition supports to regions most affected by the low-carbon tran

45、sition with 17.5 billion euros of funds.The Italian government has helped steelmaker ILVA,which faced a risk of shutdown because of environmental policies and industrial transition,resume production through state-owned companies investment to provide a guarantee for employment and the real economy,p

46、romoting the green transition.rmi.org/8Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationIn recent years,the need for a green and low-carbon transition of the steel industry has become clear amid the implementation of dual-carbon and dual-control policies.The com

47、bination of total volume regulation and scientific and technological innovation has become an important driver for steel industry decarbonization.On the one hand,backward production capacities should be strictly controlled and phased out;on the other,innovative and low-carbon steelmaking technologie

48、s should be encouraged.Compared with Europe,China started relatively late in the policy formulation of clean hydrogenbased steelmaking.Although support for hydrogen-based steelmaking was clearly proposed in high-level documents,specific policy tools are still under discussion.China has focused on re

49、ducing excess and backward capacity in the steel industry in recent years,requiring implementation of equal or reduced replacement for new steelmaking capacities and encouraging the transition to green and low-carbon technologies at the policy level.On the basis of the“Opinions on Resolving Excess C

50、apacity and Achieving Development of the Steel Industry”released by the State Council in 2016,the Ministry of Industry and Information Technology officially released the“Measures for Production Replacement in the Steel Industry”in mid-2021,explicitly indicating that the capacity replacement could be

51、 prioritized for“non-blast furnace solutions such as hydrogen-based steelmaking”to ensure equal capacity replacement.At the end of 2020,the Ministry of Industry and Information Technology issued the“Guiding Opinions on Promoting the High-quality Development of the Steel Industry”(draft for comments)

52、(hereinafter referred to as the Opinions),which proposed the innovation development goal of“promoting the agglomeration of various innovation elements to businesses,accelerating the collaborative innovation of industry-academy-research-use,and promoting the transformation and application of scientif

53、ic and technological innovation achievements.”In order to build the green and low-carbon sustainable development pattern,the Opinions mentioned hydrogen-based and non-blast furnace steelmaking as key innovative technologies and made clear in the major goals to“support the development of low-carbon s

54、teelmaking innovation alliance,and take more efforts on the R&D and application of low-carbon steelmaking technologies such as hydrogen-based steelmaking,non-blast furnace steelmaking and carbon capture,utilization and storage.Establish an integrated innovation system for carbon control,monitor and

55、evaluate in the whole process of steelmaking,and promote market-based trading of carbon emission rights in the steel industry.”At the beginning of 2022,the Ministry of Industry and Information Technology,the National Development and Reform Commission(NDRC),and the Ministry of Ecology and Environment

56、 jointly issued the“Guiding Opinions on Promoting High-quality Development of the Steel Industry,”which clearly put forward the goal of peaking carbon emissions in the steel industry by 2030.Compared with the draft for comments,the final document added the expression of“developing hydrogen-based ste

57、elmaking action plan”in the major goals,further clarifying that hydrogen-based steelmaking is the key technical route for the high-quality development of Chinas steel industry at present.Chinese Policies on Hydrogen-Based Steelmaking:Guidance by High-Level Policies with Expanding CoverageClean Hydro

58、genBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/9In February 2022,the above three ministries and departments and the National Energy Administration(NEA)jointly issued the“Guidelines for the Implementation of Energy Saving and Carbon Reduction Transformation and Up

59、grading of the Steel Industry,”which clearly proposed to“strengthen advanced technology breakthroughs and cultivate benchmark demonstration enterprises”as the key direction of work,“focusing on cutting-edge low-carbon technologies such as byproduct coke-oven gas or natural gas DRI direct reduced iro

60、n,blast furnace oxygen-rich or hydrogen-rich steelmaking,smelting reduction and hydrogen-based steelmaking,increasing the recycling and utilization of scrap steel resources,strengthening basic theoretical research on the integrity of technologies and industrial innovation and development,as well as

61、establishing industrialized pilot and demonstration.”This shows that the pilots and demonstrations of hydrogen-based steelmaking industrialization in China are supported at the policy level(see Exhibit 2).TimePolicy DocumentDepartmentsDescription2020.12Guiding Opinions on Promoting the High-Quality

62、Development of the Steel Industry(draft for comments)MIITSupport the development of low-carbon steelmaking innovation alliance,take more efforts on the R&D and applications of hydrogen-based steelmaking and non-blast furnace steelmaking.2021.05Measures for Production Replacement in the Steel Industr

63、y MIITDevelop non-blast furnace steelmaking projects such as hydrogen-based steelmaking to ensure equal capacity replacement.2022.01Guiding Opinions on Promoting High-Quality Development of the Steel IndustryMIIT,NDRC&MEECreate hydrogen-based steelmaking action plan.2022.02Guidelines for the Impleme

64、ntation of Energy Saving and Carbon Reduction Transformation and Upgrading of the Steel IndustryMIIT,NDRC,MEE&NEAFocus on cutting-edge low-carbon technologies such as by-product coke-oven gas or natural gas DRI,blast furnace oxygen-rich or hydrogen-rich steelmaking,smelting reduction and hydrogen-ba

65、sed steelmaking,and establish industrialized pilots and demonstrations.Exhibit 2 Policies related to hydrogen-based steelmaking in the steel industrySource:RMI analysisFrom the hydrogen aspect,Chinese ministries and departments have issued a series of supportive policies since 2020 to build and impr

66、ove the policy framework system for Chinas hydrogen industry development.As a key pillar of energy transition and industrial decarbonization,the importance of the hydrogen industry has been lifted to the level of national strategy.Currently,the development of the hydrogen industry is still in the in

67、itial stage,and the main focuses at the national level are the development of hydrogen fuel cells,hydrogen production,and hydrogen storage through R&D programs and other suitable approaches.The rapid and positive development of the hydrogen industry will also provide stronger infrastructure and supp

68、ly chain guarantees for the promotion of hydrogen-based steelmaking technology.In late March 2022,the NDRC and NEA jointly released“Mid-to-Long Term Hydrogen Industry Development Plan(2021 2035),”which officially mentioned“gradually exploring the potential of hydrogen as an alternative feedstock in

69、industrial applications”and clearly stated it was a goal to“carry out technology research and development of hydrogen as a reducing agent in hydrogen-based steelmaking”and“explore the demonstration application of hydrogen-based steelmaking.”Prior to this,many local governments in China successively

70、released their own hydrogen industry plans(see Exhibit 3,next page).Currently,hydrogen industry development at the local level mostly regards fuel cell electric vehicles as the main direction.However,the substitution of hydrogen in the steelmaking sector was included in the development plan of the h

71、ydrogen industry in the five northern provinces of Hebei,Henan,Shandong,Inner Mongolia,and Gansu,as well as cities such as Dalian,Datong,Changzhi,Luan,Lijiang,Liupanshui,Maoming,and Zhangjiagang(part of Suzhou),aiming to promote hydrogen steelmakingrelated technology R&D and pilot and demonstration

72、establishments.It is hoped that the application scenarios of hydrogen-based steelmaking can be given priority in the development planning and implementation of the hydrogen industry in more regions in the future and a reasonable layout planning can be realized(see Exhibit 4,next page).Clean Hydrogen

73、Based Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/10Exhibit 3Detailed policies on hydrogen-based steelmaking at different levelsDatePolicy DocumentDescriptionNational2022.03Mid-to-Long Term Hydrogen Industry Development Plan(2021-2035)Conduct R&D and application of hyd

74、rogen-based steelmaking technology with hydrogen as reducing agent and explore demonstrative applications of hydrogen-based steelmaking.Province level2022.02Inner Mongolia Hydrogen Development Plan for the 14th FYPExplore application of low-cost clean energy-based hydrogen as high-quality feedstock

75、in steel,metallurgy and refinery industries,develop demonstrations with hydrogen as reducing agent replacing coke,and encourage businesses technology breakthroughs in hydrogen-based steelmaking.2022.01Henan Strategic Emerging Industry and Future Industry Development Plan for the 14th FYPPromote gree

76、n steel technology R&D using hydrogen as alternative reducing agent and energy carrier in the steel industry.2022.01Gansu Energy Development Plan for the 14th FYPDemonstrate and promote green hydrogen-based steelmaking and green hydrogen chemical projects.2021.07Hebei Hydrogen Industry Development P

77、lan for the 14th FYPExplore substitutional role of hydrogen in metallurgy and chemical industries,focusing on the green retrofit of steel,ammonia and methanol industries.2020.06Shandong Mid-to-Long Term Hydrogen Industry Development Plan(2020-2030)Explore application of low-cost clean energy-based h

78、ydrogen as high-quality feedstock in steel,metallurgy and refinery industries.City level2022.01Liupanshui Technology Innovative Development Plan for the 14th FYPPromote research on hydrogen-based steelmaking technology,explore pilots and demonstrations of integrated hydrogen-based steelmaking and CC

79、US,and develop technology demonstration of non-blast furnace steelmaking technology.2021.07Guiding Opinions on Hydrogen Industry Development by Lijiang Peoples GovernmentGreen hydrogen+industry to encourage industrial integration and exporting application of chemical and metallurgy.2020.11Dalian Hyd

80、rogen Industry Development Plan(2020-2035)Strengthen cooperation between hydrogen producers and companies in equipment manufacture,shipping,chemical,metallurgy and new materials sectors.2020.10Changzhi Hydrogen Industry Development Plan(2020-2030)Promote hydrogen-based shaft furnace reduction steelm

81、aking technology based on Changzhis significant demand for hydrogen reducing agent in steelmaking industry,creating demonstrative application of hydrogen-based steelmaking.2020.09Datong Hydrogen Industry Development Plan(2020-2030)Promote application of hydrogen in steelmaking.2020.09Luan Hydrogen I

82、ndustry Development Plan(2020-2025)Explore substitutional application of hydrogen in metallurgy and chemical industries.2020.01Maoming Hydrogen Industry Development PlanActively explore diversified application of hydrogen resources in industries such as petrochemical,metallurgy,thermal power and int

83、egrated circuit manufacture.2019.02Zhangjiagang Hydrogen Industry Development PlanEncourage application of hydrogen in chemical and steel industries,support steelmakers to develop demonstrations of hydrogen application in the steel industry,develop green steelmaking and energy savings.DatongDalianCh

84、angzhiLuanZhangjiagang(Part of Suzhou)LijiangLiupanshuiMaomingHydrogen-based steelmaking mentioned in province-level policyHydrogen-based steelmaking mentioned in city-level policyHydrogen-specific development policy/plan launchedHydrogen as one chapter mentioned in overall policy/plan Exhibit 4Stat

85、us of regional hydrogen policies in ChinaSouce:RMI analysisSouce:RMI analysisClean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/11In the implementation of hydrogen-based steelmaking action,multiple alliances and pilot demonstrations have been gradually car

86、ried out.In November 2021,China Baowu Steel Group took the lead in launching the Global Low-Carbon Metallurgical Innovation Alliance,which has convened dozens of steel industry and upstream and downstream players and academic research institutions from 15 countries around the world,to build an open,

87、equal,co-built,and shared technology exchange platform.A number of leading Chinese steel companies have also started hydrogen-based steelmaking pilot demonstration projects,including Bayi Steel Companys hydrogen-rich carbon cycle blast furnace pilot project,Zhanjiang Steels hydrogen-based shaft furn

88、ace system project,and HBIS Groups hydrogen DRI plant with an annual capacity of 1.2 million tons for steelmaking raw materials.Among these,the Zhanjiang project was listed as a key preparatory project in the fifth session of the 13th Guangdong Provincial Peoples Congress in January 2022.The constru

89、ction progress,technological breakthroughs,and economic performance of these key projects will be closely watched by the industry and the government,and will also become an important source of evidence for the formulation and improvement of hydrogen-based steelmaking policies in China.rmi.org/12Clea

90、n HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationCharacteristics and Policy Implications of Chinas Steel IndustryCharacteristicsPolicy implications1.Chinas steel production remains high with emissions yet topeak.Emissions reduction for primary steel mainly comes fro

91、m energy saving and efficiency increase in China,but comes from process reform in the EU.Create policies compatible with Chinese situation and encourage energy saving and emissions reduction,scrap utilization,and product optimization in the short term.2.China uses coke as the main reducing agent,whi

92、le the US and the UK use natural gas,which uses similar equipmentas hydrogen.Fully consider the characteristics of technology route in policymaking,using hydrogen injection in BF as a transitional route.3.Chinese steelmakers are mainly SOEs with SASAC as theirinvestor,having limited public financing

93、 channels.Encourage SOE steelmakers to make more efforts in hydrogen-based steelmaking from SASACs point of view.4.New technology in Chinese steelmakers mainly comes from internal incubation and peer cooperation with universities as main partners,having limited cross-industrycooperation.Encourage st

94、eelmakers to seek cost-effective technology support from external provider and institutions and introduce cross-industry cooperation in the industrial chain.Exhibit 5Characteristics and policy implications of Chinas steel industry The steel industry accounts for nearly 10%of global carbon emissions

95、and 17%of Chinas total.The timeline and roadmap for decarbonization of the steel industry is crucial for the low-and zero-carbon transition across the global economy.Technically,clean hydrogenbased steelmaking is a zero-carbon solution that has the potential to reach parity with traditional steelmak

96、ing routes.Clean hydrogenbased steelmaking pilot and large-scale developments need effective policy support and best practice guidance.In Europe,government funding to support hydrogen-based steelmaking currently covers a wide range of project stages.In China,a series of high-level policies has been

97、put forward to support hydrogen steelmaking technology R&D,alliance establishment,pilot and demonstration,and capacity replacement.This report compares the characteristics of clean hydrogen steelmaking policies in China and Europe,analyzes and estimates the development mode of hydrogen-based steelma

98、king in China based on local industry features,and provides relevant policy recommendations for promoting the development of clean hydrogenbased steelmaking(see Exhibit 5).BF=Blast Furnace;SASAC=State-Owned Assets Supervision and Administration Commission of the State Council;SOE=State-O Owned Enter

99、prise Source:RMI analysisCharacteristic 1:Chinas steel production is still high,with carbon emissions yet to peak in the short term,so the means of emissions reduction of crude steel production in China still focuses more on energy saving and efficiency enhancement compared with the process reform i

100、n Europe.As shown in Exhibit 6(next page),Chinese steel production began to increase rapidly around 2000 and has not yet peaked.In contrast,steel production in Europe is limited and has remained stable at 210 million tons per year since 2010,with little growth in carbon emissions.In addition,the tra

101、ditional blast furnace steelmaking route of European companies is relatively mature in energy saving,efficiency enhancement,and environmental protection technology.Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/13As shown in Exhibit 7,the average carbo

102、n intensity of the traditional blast furnace route in the EU is 1.9 tons of CO2/t crude steel,with efficiency and carbon intensity close to the optimal level.Thus,the carbon reduction focus will mainly fall on process route reform.With the rapid development of the steel industry in the past decade,t

103、he energy efficiency of Chinas technology and equipment has been greatly improved.Specifically,the comprehensive energy consumption per ton of steel decreased by 4.4%from 2011 to 2015 and by 6.8%from 2016 to 2020,and is expected to further decrease by more than 2%from 2020 to 2025,with carbon emissi

104、ons intensity to be further reduced.Therefore,China needs to find the balance among capacity control,energy efficiency,and process reform.Accordingly,policymaking should adapt to the status of Chinas steel industry and gradually shift from the early stage of encouraging energy conservation,emissions

105、 reduction,and product optimization to the more advanced stage of encouraging and supporting new process routes such as clean hydrogenbased steelmaking.Exhibit 6Steel production in China and Europe0.02.04.06.08.010.012.0369200020004200520062007200820092010

106、20001720182019Steel production(million t/year)Exhibit 7Average CO2 intensities of blast furnace and basic oxygen furnace(BF-BOF)steel production process0.00.51.01.52.02.53.03.5CO2 intensity of BF-BOF(t CO2/t crude steel)Canada Germany EU Mexico US France Turkey Russia Italy Chi

107、na S.Korea Japan Vietnam Ukraine IndiaEuropeChinaSource:World Steel AssociationSource:Global Efficiency IntelligenceClean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/14Characteristic 2:Chinas steel production uses coke as the main reducing agent,while nat

108、ural gas is the major reducing agent for countries such as the UK and the United States.As Exhibit 8 shows,China relies far more on coke than the UK or the United States,and the natural gas route is not a main steelmaking method in China.Coke is solid and the reaction equipment is mostly blast furna

109、ce,while natural gas is gaseous and the reaction equipment is mostly shaft furnace.Hydrogen DRI is one of the main technologies of hydrogen-based steelmaking at present.Compared with the coke route,the natural gas route has a higher similarity with the hydrogen route in equipment and technology.Ther

110、efore,given the difficulty of hydrogen-based steelmaking reform caused by the existing reducing agent structure,the policy development of clean hydrogenbased steelmaking in China should fully consider the characteristics of the technical route and encourage hydrogen injection in blast furnaces as a

111、transition route in the short and medium term to avoid large-scale stranding of blast furnace equipment.Exhibit 8Energy consumption structure of steelmaking in China,the United States,and the UK 70%60%50%40%30%20%10%0%34%2%3%58%25%14%2%34%32%12%17%42%China(2018)US(2014)UK(2015)CoalCokeGasElectricity

112、Central stateowned and state-owned enterprises are funded by central and local SASACs,respectively,with fewer nonstate shareholders and limited public financing channels.Therefore,central stateowned and state-owned enterprises in the steel industry are greatly influenced by SASAC.In policy setting,S

113、ASAC can play its supervisory and management role to promote the deployment of clean hydrogenbased steelmaking pilot projects from top to bottom,fully demonstrating the exemplary leading role of central stateowned and state-owned enterprises in the low-and zero-carbon transition of Chinas steel indu

114、stry.Source:RMICharacteristic 3:Chinas steelmakers are mainly central stateowned and state-owned enterprises that mayhave a strong exemplary role under the supervision and management of the State-Owned Assets Supervision and Administration Commission(SASAC).As shown in Exhibit 9(next page),China Bao

115、wu Steel Group,a central stateowned enterprise,and HBIS Group,a state-owned enterprise,ranked first and second in China in terms of total steel production in 2020.Total steel production of state-owned enterprises accounts for 63%of the top 10 players.Clean HydrogenBased Steel in China and Europe:Pol

116、icy Development and Chinas Implicationrmi.org/15RankCorporateProduction(Mt)Type1Baowu Steel*115Central SOE2HBIS*44Regional SOE3Shagang(Shasteel)42Private4Angang(Ansteel)*38Central SOE5Jianlong*36Private6Shougang(Shousteel)34Regional SOE7Shangang(Shan steel)31Regional SOE8Delong28Private9Valin27Priva

117、te10Fangda20PrivateTotal(Mt)415State-owned enterprise(SOE)total(Mt)262State-owned enterprise(SOE)ratio63%Exhibit 9Top 10 steelmakers in China by production(2020)Characteristic 4:Chinese steelmakers mainly rely on internal incubation for new technology development,with most of the cooperation coming

118、from industrial peers or academic institutions and limited cross-industry cooperation.On the one hand,Chinas advanced steelmakers all have large-scale internal scientific research departments that lead the incubation of new technologies.On the other,some steelmakers have also established hydrogen-ba

119、sed steelmaking cooperation with scientific research institutions.For example,Ansteel and the Dalian Institute of Chemical Physics,Chinese Academy of Sciences,signed a joint R&D agreement on green hydrogen-based steelmaking technology,and Jianlong Group is working with the University of Science and

120、Technology Beijing to develop new hydrogen-rich smelting reduction process.However,as the scale of hydrogen-based steelmaking demonstration projects gradually increases,it is necessary to consider introducing cross-industry cooperation covering all links of the industrial chain and establishing a ma

121、ture cooperation model to reasonably share the potential risks of a new technology application.Steelmakers can jointly promote the construction and development of an accelerated business model for innovative technologies through cooperation with potential partners including external technology provi

122、ders and start-ups.*Companies with announced carbon peaking and carbon neutrality goals.Source:World Steel Associationrmi.org/16Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas ImplicationThe development of hydrogen-based steelmaking in Europe currently is mainly policy dr

123、iven,with major projects often receiving significant support from preferential policies.The key of the policy-driven model is to establish a robust system for different project stages,such as providing smaller-scale public funding in the early R&D stage and larger-scale funding in the more advanced

124、deployment stage.Exhibit 10 shows the development process and financial support of HYBRIT,a successful Swedish case.In addition to project partners SSAB,LKAB,and Vattenfall,public funds from the government also played a key role in this process.The Swedish Energy Agency has continued to support pref

125、easibility studies,feasibility studies,and pilot stages,and has gradually increased the amount of funding at different project stages.During the demonstration stage,the HYBRIT project received more support from the EU Innovation Fund to facilitate the commercial delivery of clean hydrogenbased steel

126、making products from the demonstration project in 2026.Comparison of Clean HydrogenBased Steelmaking Development Models in China and Europe,and Outlook of the Chinese Industry Development2016-2017Prefeasibility study2018-2024Feasibility study,Pilot2025-2040Demonstration,Transformation2016 Project st

127、udyHYBRIT prefeasibility study.Hydrogen-based steelmaking research project that lasted for four years,including clean pellet,hydrogen DRI,and sponge iron EAF.20162017 JVSSAB,LKAB,and Vattenfall jointly launched HYBRIT54 million SEK from SEA to support R&D(2017)6.7 million SEK from Swedish Energy Age

128、ncy(SEA)to support prefeasibility study(2016)2018 Cost assessmentCost assessment shows that the cost of hydrogen-based steelmaking may be 20%30%higher than that of traditional BF-BOF20182024 Steelmaking pilotLule steelmaking pilot started construction in 2018,was operational in 2020，and delivered th

129、e first batch of fossil-free steel to Volvo in 2021.20192024 Pellet pilotMalmberget pellet pilot started construction in 2019,was operational in 2020 and produced the first batch of fossil-free pellet using bio-oil.Lule pellet pilot uses hydrogen and electric heating to replace fossil fuels.20212024

130、 Hydrogen storage pilotSvartberget hydrogen storage pilot is located 2535 m underground near Lule,started construction in 2021,and is expected to be operational by 2022520 million SEK from SEA to support two pilots,accounting for 37%of total investment(2018)50 million SEK from SEA to support hydroge

131、n storage project,accounting for 25%of total investment(2019)2025 EAF replacement demonstrationOxelsunds EAF demonstration uses electricity to smelt sponge iron produced by hydrogen DRI and is expected to be operational by 2025.2026 Hydrogen-based steelmaking demonstrationGllivare demonstration cond

132、ucted environmental assessment in 2020 and is under process design.Expected to be operational by 2026 and will combine with fossil-free pellet to deliver commercialized clean hydrogen-based steel.Gllivare demonstration phase 2 to be operational by 2030140 euros from EU Innovation Fund to support HYB

133、RIT pellet and steelmaking demonstrations(2022)2.2 million SEK from SEA to support feasibility study of demonstrations(2020)BF-BOF=Blast FurnaceBasic Oxygen Furnace;DRI=Direct Reduced Iron;EAF=Electric Arc Furnace;JV=Joint VentureExhibit 10 HYBRIT project success driven by policy supportNote:1 SEK=0

134、.10 euro=0.66 RMB.Souce:RMI analysisClean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/17In China,policies related to clean hydrogenbased steelmaking are still mainly high-level guidance,and specific methods are promoted mainly through active pilots by lea

135、ding enterprises.At present,many players including Baowu,HBIS,JISCO,and Jianlong have taken active actions in this field and their relevant projects are shown in Exhibit 11.However,gray hydrogen or industrial by-product hydrogen is the main source of hydrogen supply in most domestic hydrogen-based s

136、teelmaking projects,while green hydrogen is rarely deployed and mostly stays at the planning phase.For example,the second phase of the Baowu Zhanjiang DRI project plans to use green hydrogen produced by solar photovoltaic and wind power in the South China Sea.Green hydrogen produced by green electri

137、city will be used in the second phase of the HBIS Xuansteel hydrogen-based steelmaking demonstration project.Jianlong Group has covered green hydrogen smelting reduction technology in its green and low-carbon development roadmap,but the specific details and implementation remain unclear.Exhibit 11Hy

138、drogen-based steelmaking companies and projects in ChinaCompanyProjectBaowu Steel H2 blended in blast furnace(at the R&D stage)H2-direct reduced iron(DRI)pilot project(1 Mt/y,by-product hydrogen to green hydrogen)HBIS H2-DRI pilot project(1.2 Mt/y,by-product hydrogen to green hydrogen)JISCOCoal-base

139、d hydrogen metallurgy pilot(at the R&D stage)Jianlong Steel H2-s smelting Reduction Iron pilot project(0.3 Mt/y,by-product hydrogen)Rizhao Steel H2-DRI pilot project(0.5 Mt/y,by-product hydrogen from acetate synthesis)JinnanSteel H2 injection into two 1,860 m3 blast furnaces s(300 Mt/y)ZhongjinTaiha

140、ng H2-DRI pilot project(0.3 Mt/y,by-product hydrogen)Souce:RMI analysisAs an emerging low-carbon technology,clean hydrogenbased steelmaking needs to be improved in terms of technology maturity and cost economy.In general,the early development of clean hydrogenbased steelmaking is mainly driven by le

141、ading enterprises.Thereafter,as the technology and market mature,clean hydrogenbased steelmaking will gradually transition from a first moverdriven model to a policy-driven model that acts on a wider range of stakeholders,and then to a more sustainable market-driven model in the long run.It is sugge

142、sted that policymaking in China should fully consider the advantages and limitations of different driving models,develop a preferential ecosystem,and promote the maturity of the clean hydrogenbased steelmaking industry chain.Exhibit 12 Outlook on the development model of clean hydrogenbased steelmak

143、ing in ChinaStageEarly stage with technical bottle-necks and lack of successful cases.Medium term with successful cases but high cost.Long term with mature cost and technology.FeatureMainly SOE steelmakers promote carbon reduction driven by SASAC.Improve the economy of clean hydrogen-based steelmaki

144、ng using policy measures like subsidies,tax reduction,and funds.As technology and economy of hydrogen-based steelmaking mature,utilize the cost advantage and green attribute of hydrogen-based steelmaking driven by market mechanism.AdvantageStrong executability reduces risk of stranding and rapidly i

145、ncreases technology maturity.Effectively address the high cost of emerging technology and improve engagement in low-carbon projects.Market competition optimizes the quality of hydrogen-based steelmaking projects,reducing pressure for government and SASAC.DisadvantageCompanies lack proactivity and ec

146、onomy of low-carbon projects is low.Bring financial pressure to local governments and it is difficult to implement in regions with limited resources.Infrastructure,technology,and cost optimization of hydrogen-based steelmaking will face challenges,with risks in expansion of high-emissions but low-co

147、st projects.DevelopmentGovernment introduces public policies to encourage non-SOE steelmakers to participate.Low-carbon technology matures,green premium reduces,and policy incentives phase out.Monitor the development of marketized clean hydrogenbased steel frequently to avoid reducing market share o

148、f hydrogen-based products.First mover drivenPolicy drivenMarket drivenTechnology maturityCost reductionSouce:RMI analysisSASAC=State-Owned Assets Supervision and Administration Commission of the State Council;SOE=State-Owned EnterpriseClean HydrogenBased Steel in China and Europe:Policy Development

149、and Chinas Implicationrmi.org/18In the medium term,when successful cases of clean hydrogenbased steelmaking emerge,the market will gradually transition to a policy-driven stage.At this time,the maturity of hydrogen steelmaking technology is improved,but the economy is still insufficient,requiring pu

150、blic policy means such as subsidies,tax reduction,and funds to effectively improve the economy of clean hydrogenbased steelmaking projects.Favorable policies will attract more participants,improve the enthusiasm of enterprises,help break through all segments of the industrial chain,and reduce the ex

151、perimental cost for enterprises.Public policy means need to leverage private funds with government funds,so there are high requirements for the governments financial situation and financing capacity.Government funds are difficult to implement in areas where local government resources are limited.Wit

152、h the gradual improvement in cost control of pilot projects thanks to favorable policies,the green premium will be gradually reduced and policy incentive means can be steadily reduced accordingly.When the cost is reduced and the economy of the clean hydrogenbased steelmaking route is similar to that

153、 of traditional steelmaking routes,the scale of supporting policies can be gradually reduced and the development model of the industry will transition to a market-driven model.The industry structure will be regulated by market mechanisms,with steelmakers with poor profitability and insufficient tran

154、sition effort eliminated by the market or merged and acquired because of higher requirements for technology,cost control,and management level.In this model,the cost advantages and environmental attributes of clean hydrogenbased steelmaking can be maximized,but traditional steelmaking routes with hig

155、h emissions will face more challenges.The advantage of the market-driven model is that it can optimize project quality through healthy market competition and reduce pressure for government and state-owned investors.However,the market-driven model has high requirements on the infrastructure and techn

156、ical level of the clean hydrogenbased steelmaking industry.If supporting policies are withdrawn too early,there may be risk of repeated expansion of high-emissions projects in traditional routes(see Exhibit 13).Exhibit 13 Outlook on clean hydrogenbased steelmaking policies in ChinaFirst mover driven

157、Policy drivenMarket drivenClean route policy intensityClean route supportive policiesClean route mandatory policiesShift to market mechanism with reducing policy roleDevelopment stageSouce:RMI analysis As shown in Exhibit 12(previous page),Chinas current first movers are mainly state-owned enterpris

158、es,with sufficient motivation and resources to promote the rapid implementation of a number of demonstration or pilot projects.Even though state-owned enterprises have limited flexibility,they have a high success rate of project promotion and a low risk of new projects being stranded thanks to their

159、 strong ability to execute.Accordingly,policymakers can improve the top-level policy conception and detailed regulations in practice,and accurately control and optimize the policy system related to clean hydrogenbased steelmaking with the minimum experimental cost in continuous iteration based on th

160、e pilot experience of a group of first movers represented by state-owned enterprises.In the process of transition from the firstmoverdriven model to the policy-driven model,the government should gradually develop a transparent policy system to encourage clean hydrogenbased steelmaking to attract mor

161、e steelmakers without a state-owned background.Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.org/19Clean hydrogenbased steelmaking is an emerging low-carbon technology that is still in its early stage in China.According to the technical features of clean

162、hydrogenbased steelmaking,and the characteristics of Chinas steel industry,the following policy recommendations are provided for reference:Establish a joint mechanism consisting of production,universities and colleges,and research institutes to improve the sustained innovation of steelmakers.By comb

163、ining the technological breakthroughs of clean hydrogenbased steelmaking from the scientific research with the industrial practices,the emerging technology will gradually move from laboratory to pilot project.Standardized and large-scale cultivation of clean hydrogenbased steelmaking talents will la

164、y a sustainable foundation for industry development in the coming decades.Steelmakers can make more efforts in cooperation with scientific research institutions,universities,technology providers,and so forth,to build an effective innovation and R&D management mechanism and provide a high-quality dev

165、elopment environment for clean technologies.Promote the exchange of experiences among steelmakers and guide the sharing of intellectual property rights and collaborative development at the industrial level.At present,Chinese steelmakers clean hydrogenbased steelmaking technology is still in the R&D

166、or pilot stages.Although enterprises can choose different processes based on their own technology experiences and resources,they can fully explore the potential for process improvement in aspects such as management mode,financing mode,and technology direction through industry-wide exchanges and coop

167、eration.Relevant departments and industry associations can actively promote deeper and broader exchanges among steelmakers,reduce the gap between players in the low-carbon transition process,avoid vicious competition,and promote sustainable development of the industry by orderly guiding the sharing

168、of intellectual property rights.Encourage upstream and downstream sectors of the industry to actively participate in early-stage R&D and fixed asset investment and form a costbenefit distribution mechanism for mutual benefit across the entire industrial chain.At present,the profit model of domestic

169、clean hydrogenbased steelmaking pilot projects in China is immature,with certain risks and uncertainty in the cost-sharing mechanism.On the supply side,hydrogen suppliers and technology providers can be strongly encouraged to explore the best business cooperation model in the pilot projects of clean

170、 hydrogenbased steelmaking.On the consumption side,guiding consumer companies to form a reasonable willingness-to-pay green premium and strengthening the market education of end consumers can be considered to force the low-carbon transition of the steel industry with downstream low-carbon demand.Est

171、ablish reasonable and effective financial policy guidance and external market mechanisms to combine government subsidies with market regulation and provide strong financial support for clean hydrogenbased steelmaking projects.Policy measures could be enriched to secure funding needs.For example,tran

172、sition-supporting public funds for each cycle of the project should be designed and used to leverage private funds to ensure the amount and sustainable sources of funds needed.In addition,measures should be taken to accelerate the development of the national carbon market,accelerate the inclusion of

173、 the steel industry,strengthen relevant regulation,and reduce the green premium of clean hydrogenbased steelmaking through market approaches to internalize the cost of carbon emissions.Policy RecommendationsClean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implicationrmi.or

174、g/20Promote the construction of the complete industrial chain of green hydrogen and green electricity,build relevant infrastructure sufficient to support the zero-carbon transition of steel and other industries,and provide preferential prices for green electricity and green hydrogen to support their

175、 early development.In the early stage of development,transitional solutions such as by-product hydrogen utilization should be promoted,creating conditions for the increased utilization of hydrogen in industrial applications,to pave the road for the large-scale application of hydrogen once a zero-car

176、bon hydrogen supply is achieved.In addition,vigorous support should be provided for the construction of the complete ecosystem of green hydrogen and green electricity.This includes upstream production and midstream storage and transportation as well as downstream utilization,and reasonably and timel

177、y planning channels for power and hydrogen transmission based on the distribution characteristics of steel capacity to reduce the risk of insufficient and unstable supply of green electricity and green hydrogen resources in clean hydrogenbased steelmaking projects.Clean HydrogenBased Steel in China

178、and Europe:Policy Development and Chinas Implicationrmi.org/211 World Steel Association,Steel Statistical Yearbook,2019.2 Ali Hasanbeigi,Steel Climate Impact:An International Benchmarking of Energy and CO2 Intensities,Global Efficiency Intelligence,2022.3 Ji Chen,et al.,Pursuing Zero-Carbon Steel in

179、 China:A Critical Pillar to Reach Carbon Neutrality,RMI,2021.4 Martin Pei,et al.,Toward a Fossil Free Future with HYBRIT:Development of Iron and Steelmaking Technology in Sweden and Finland,Metals,10,no.7(2020):972.https:/doi.org/10.3390/met10070972.EndnotesShuyi Li,Ting Li,Guangyu Tan,and Yujun Xue

180、,Clean HydrogenBased Steel in China and Europe:Policy Development and Chinas Implication,RMI,2022RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow interested parties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.RMI Innovation Center22830 Two Rivers RoadBasalt,CO 81621www.rmi.org August 2022 RMI.All rights reserved.Rocky Mountain Institute and RMI are registered trademarks.