What will it take to get Asia Pacific’s first commercial scale green iron projects to market?

What will it take to get Asia Pacific’s first commercial scale green iron projects to market? 

Today GH2 published Unlocking the first commercial green iron projects in Asia Pacific: an action plan for governments, launched at Global Citizen Now in Perth.  

Green iron is crucial for decarbonizing the steel industry, which currently accounts for between seven and nine percent of global greenhouse gas emissions. Recycled scrap metal will play an important role, but it is limited in quantity and cannot serve the high-specification grades that much of Asia’s manufacturing depends on. The key is to replace primary iron produced with coal with green iron produced with green hydrogen and renewable electricity.  

Close to three-quarters of the world's steel is made in Asia Pacific. Australia supplies more than half the world's seaborne iron ore, much of it departing from Western Australia where I am this week. The huge deposits of iron ore in Western Australia have so much potential to be transformed into green iron ore if the right policies are put in place.   

The wider region holds the renewable resources, the shipping routes and the manufacturing demand that a green iron trade would need. What it does not yet have is a single green iron project at commercial scale. So what will it take to get these projects to market? 

The blast furnace relining cycle is crucial 

Put simply, we need to stop building and relining blast furnaces, which will burn coal for decades to come. We need to shift toward direct reduced iron and scrap, electric smelting and electric arc furnaces. The steel industry's default expectation is that green iron demand only scales after 2035, often into the 2040s. Our report challenges that assumption.  

Coal-based blast furnaces reach their first major relining when they are around twenty years old. Relining costs roughly a tenth of a new plant. In 2023, 57 per cent of blast furnace–basic oxygen furnace plants had been operating for between eight and twenty-four years, which places much of the global fleet at or approaching its next reinvestment decision. We need to act now. Each new or relined blast furnaces will pollute for decades, pushing 1.5 degree alignment further out of reach. 

Seven barriers 

We identify seven barriers that block the first green iron investment decisions:  

1. In most markets, emissions are not properly priced; 
2. Demand is uncertain and not yet bankable;  
3. While the cost of renewable electricity and green hydrogen production continue to fall, the cost gap (sometimes called the green premium1) is substantial; 
4. The cost of capital penalises the cleanest assets;  
5. The standards and certification schemes that verify environmental attributes (including but not limited to the carbon footprint) of hydrogen, iron and steel are not agreed, interoperable or recognized across borders;  
6. Most staged “low carbon” projects starting on natural gas have no credible path to hydrogen utilisation; and  
7. Every part of the value chain must move at once, and regional coordination is weak.  

Five asks 

In response, our report makes five recommendations to governments:  

1. Price GHG emissions. Global steel markets are distorted by massive direct and indirect subsidies for fossil fuels and underpriced GHG emissions. These have regressive social outcomes and devastating environmental impacts. Emissions trading, carbon taxes and border adjustment mechanisms are the only instruments that address the cause rather than the symptom. They are the single most effective and efficient policy measure. 
2. Focus on measures that can reduce the cost of capital for early movers. Governments must create an enabling policy environment that lowers investment risk and rewards innovation. This should include offering targeted financial incentives, setting long-term emission and sustainability standards that give regulatory certainty, and investing in the critical infrastructure (including renewable energy and hydrogen supply chains) that these projects depend on. 
3. Build demand across borders, beginning with designating green iron and steel for public procurement.  
4. Apply a gas to hydrogen trajectory test, so that public support for staged gas-to-hydrogen projects is conditional on contracted volumes, a binding carbon intensity trajectory, the cleanliness of the electricity behind the hydrogen, and independent verification. Hydrogen utilization should be planned, permitted and financed from the outset, not merely intended.  
5. Support emissions accounting certification that is transferable and interoperable. Clear definitions, independent certification and labelling are needed to distinguish them from conventional production methods and products, with safeguards to prevent fraud and greenwashing. 

We also review progress in key markets. 

• Japan has assembled more policy instruments than any other economy in the region. Mandatory emissions trading from FY2026. Capital subsidies for hard-to-abate conversion. State debt guarantees through the GX Acceleration Agency. A production tax credit of JPY20,000 (about USD 125) for every tonne of green steel. Green procurement criteria. A clean-vehicle subsidy add-on rewarding carmakers that use lower-emission steel. A transition finance roadmap. And yet Japan produces no commercial quantities of green iron.  
  
  The Renewable Energy Institute's diagnosis is that the package is undone by its design rather than its scale. The emissions trading scheme has no sector-wide aggregate cap. Benchmarks are set per process rather than per tonne of steel, so a company replacing a blast furnace with direct reduction is measured against the electric arc furnace benchmark rather than rewarded against the blast furnace baseline. And within the Green Innovation Fund's steel–hydrogen programme, 64 per cent of the budget is allocated to injecting hydrogen into blast furnaces against 26 per cent for direct reduction. Too much public money is flowing to the coal-based incumbents, not to the green hydrogen-based innovators. 

• China has taken hydrogen metallurgy further than anywhere else, with four clean iron projects under construction and seven more in development. Technological feasibility is being established, although readiness is often specific to the ore feedstock. The interesting development is in capacity governance. Between 2017 and 2024, China's capacity replacement mechanism approved roughly three times as much new blast furnace capacity as electric arc furnace capacity. The May 2026 revision should change this. New ironmaking at least 60 per cent below the blast furnace route now qualifies for equal-volume replacement, as do several electric arc furnace cases. China should go further. Coal-for-coal replacement remains available at 1.5 to one.  

• Korea is where one of our report’s key recommendations will be tested first. The K-GX strategy announced on 7 October commits 1,000 trillion won (around USD 750 million) between 2026 and 2035, with steel among five priority sectors. It includes a 300,000 tonne hydrogen ironmaking demonstration at Pohang. Around 72 per cent of Korea's coal-based blast furnace capacity reaches the end of its campaign life by 2030, so these decisions are key. Solutions for Our Climate have put it well: the strategy sets destinations without routes. There is no phase-out schedule for the eleven blast furnaces now operating, no quantified hydrogen and electricity demand to set against supply, and no statement of how support is tied to conversion speed, scale or emissions reduction. Whether that conditionality appears in the sector roadmaps due in December is perhaps the single most consequential policy decision in the region over the next year. 

• Australia should lead on standards and procurement. Completing the Product Guarantee of Origin for iron and steel, and securing its recognition by importing governments in Japan, Korea and the European Union, would help make Australian green iron bankable. Federal and state procurement, alongside the Green Iron Investment Fund, could help anchor the first commercial volumes. 

Those measures would work better inside a settled view of what Australia is building. To get there a government and industry process that defines the intended industry (Australia’s position in the value chain, the target markets and products, the scale sought, the priority regions, the timing, and the basis on which Australian iron would compete) and then works backwards from it, identifying the constraints that stand in the way and the measures that would clear each one, set out as a coordinated delivery plan with named owners and dates.  

The prize for getting this right is not only environmental. Modelling by Agora Industry and Cambridge Econometrics finds that where importers source around half their iron abroad, green iron trade benefits both importing and exporting economies. By 2050 Japan gains around USD 50 billion in GDP and 592,000 jobs (a little over one per cent of its workforce); Korea adds 336,000 jobs (or 1.49 per cent of its workforce, the largest proportional gain in the study); China adds 8.6 million jobs; and Australia adds USD 11 to 16 billion in GDP, with iron and steel output almost thirty per cent above the no-trade baseline by 2050. Unlocking the first commercial scale green iron projects is key to realising that potential. 

Sam Bartlett 

Director, Standards and Certification 

Green Hydrogen Organisation