China’s steel industry could reduce its carbon emissions by nearly 37 percent from peak levels by the mid-2030s if it accelerates the shift toward cleaner production technologies, according to a new analysis by energy researchers. The projected reduction highlights how structural changes in one of the world’s largest industrial sectors could significantly influence global climate targets. The study indicates that expanding the use of electric arc furnaces (EAFs) — a steelmaking process that relies more heavily on recycled scrap and electricity rather than coal-based blast furnaces — will be central to the sector’s decarbonisation pathway. If EAF production accounts for around 20 percent of China’s steel output by 2030, emissions from the industry could fall by about 37 percent by 2035 compared with peak levels.
China’s steel industry is the largest in the world, producing roughly half of global steel output and accounting for a significant share of industrial carbon emissions. Globally, steel manufacturing contributes about 7–8 percent of total carbon dioxide emissions, making it one of the most carbon-intensive sectors of the global economy. The transition to cleaner technologies could therefore have outsized environmental benefits. Electric arc furnaces typically generate far lower emissions because they melt scrap steel using electricity instead of smelting iron ore in coal-fired blast furnaces. Analysts estimate that raising EAF output to 15–20 percent of China’s steel production could cut blast-furnace-based steel output by 80–120 million tonnes, a reduction roughly comparable to Japan’s annual steel production. However, the report also notes that recent emissions declines in China’s steel sector have largely been driven by falling demand rather than structural decarbonisation. In 2025, crude steel output in the country dropped below 1 billion tonnes for the first time since 2020, resulting in an estimated reduction of about 150 million tonnes of CO₂ emissions. This decline reflects broader changes in China’s economy, particularly a slowdown in construction and property development that has reduced domestic demand for steel. Yet analysts caution that production cuts alone cannot deliver long-term climate benefits unless accompanied by structural changes in manufacturing technology. Industry reform could also deliver financial advantages. Researchers estimate that increasing the share of electric arc furnaces to around 20 percent of production could boost the steel sector’s profitability while reducing debt pressures on companies, which have accumulated significant liabilities over the past decade.
Despite these potential gains, China’s green transition in steelmaking still faces significant challenges. Electric furnace operations require stable supplies of scrap metal and large quantities of electricity, both of which remain unevenly available across regions. In addition, coal-based blast furnace technology still dominates roughly 90 percent of the country’s steel capacity. For global climate policy, the direction of China’s steel industry remains critical. As the largest producer and consumer of steel, the country’s industrial transformation could shape the trajectory of decarbonisation across heavy manufacturing sectors worldwide. If the sector successfully shifts toward cleaner production methods, analysts say it could become one of the most significant contributors to global industrial emissions reductions over the coming decades.
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China Steel Transition Could Cut Emissions Significantly
