The global steel industry is not only under pressure to reduce carbon emissions, but also stands at the threshold of a complex transformation shaped by energy transition, resource scarcity, and new trade regimes. At the center of this transformation lie green steel technologies and hydrogen-based production models. China, Japan, and South Korea are responding to this transition in line with their respective economic structures, energy strategies, and political visions. External frameworks like the European Union’s Carbon Border Adjustment Mechanism (CBAM) are further shaping the direction of this process.
In the second half of 2025, the green steel race centered in Asia is expected to accelerate. China’s potential first CBAM-compliant shipment via Baowu Steel Group will represent not only a technical but also a symbolic milestone. While China continues to criticize CBAM, the development of carbon footprint accounting systems and a transition toward emissions trading indicates its preparedness for the EU’s climate norms.[i] This approach strengthens technical compliance while also reflecting China’s inclination to integrate with new environmental standards in foreign trade.
Baowu’s modernization of its blast furnace systems achieving over 20 percent carbon reduction signals that China is preparing for global competition not only in production volume but also in low-carbon production capacity.[ii] Furthermore, China has announced seven large-scale investment plans based on Direct Reduced Iron (DRI) technology aimed at producing 15 to 20 million tons of low-carbon steel annually by 2030.[iii] However, sustaining these gains requires that production processes be supported by transparency, traceability, and international oversight.
Inequities in carbon pricing present a major structural challenge for China. As of April 2025, the carbon price in China stood at $11.36 per ton, while in the EU Emissions Trading System it was $76.10.[iv] Although this gap provides a short-term cost advantage, it carries long-term risks for market acceptance. China’s shortcomings in data transparency and traceability may hinder its ability to go beyond technical compliance in future phases of CBAM.
On the Japanese front, Nippon Steel’s 43 percent carbon emissions reduction at its Chiba facility in December 2024 demonstrated the potential of hydrogen-based production technologies.[v] While this success highlights Japan’s engineering capabilities, the path to commercialization remains slow due to the challenges of scaling. The vast size difference between commercial furnaces and laboratory prototypes makes the scale-up process technically and economically complex.
Japan’s limited domestic hydrogen production capacity increases dependence on imports and raises costs. The government aims to reduce the unit cost of green hydrogen to $0.20/m³ by 2030 and $0.13/m³ by 2050. However, the threshold for competitive steel production is only $0.053/m³. Failure to reach this target could limit the impact of Japan’s advanced engineering solutions in the market.
Nonetheless, Japan’s key advantage lies in the high compatibility of its technologies with the EU’s digital carbon monitoring systems. If future green accreditation schemes are built upon Japan’s traceability infrastructure, the country could emerge not just as a producer but also as a standard setter in the steel sector. The use of Japanese technologies as foundational tools in supply chain certification could bring Japan both prestige and strategic autonomy.
South Korea, meanwhile, is managing this process through a synchronized strategy focused on energy transition and regional cooperation. POSCO plans to commercialize hydrogen-based DRI technology by 2028 and is developing systems for efficiently processing lower-grade iron ore. The pace of the country’s renewable energy investments not only facilitates this goal but also helps reduce external dependency and build a strategic position.
South Korea’s strength lies in developing systems that balance production efficiency with data transparency. POSCO’s collaborations with ASEAN countries are laying the groundwork for preferential trade regimes in carbon-neutral steel products. This could position South Korea not only as a producer but also as a regional norm-setter.
If carbon-based trade mechanisms like CBAM are adopted in various forms across G7 and G20 countries by 2030, green steel will become not only an environmental necessity but also a strategic foreign policy tool. In this context, Japan’s technological edge and Korea’s regional integration capabilities could serve as substantial counterweights to China’s production volume. However, China’s technical compliance with the EU alone will not suffice; it must also be supported by normative, digital, and governance dimensions.
If traceability systems based on data become mandatory at the international level, carbon accounting methodologies and digital certification infrastructures will define the new boundaries of competition. Japan’s experience in this area could establish the country as a “norm architect” in the steel industry. Meanwhile, South Korea’s potential digital carbon consortiums with countries like Singapore, Thailand, and Indonesia could lay the foundation for a new normative bloc outside the West.
In conclusion, the strategic differences in the green steel transition among Asia’s three major producers carry the potential to reshape not only industrial competition but also global governance systems, technology licensing regimes, and digital oversight infrastructures. China’s long-term leadership will only be sustainable if supported by data security, international compliance, and traceability mechanisms beyond sheer production volume. Japan could rise as a global certificate provider by combining technical superiority with norm-setting capacity. South Korea, through its integrative and methodical approach, has the potential to become the core player in Asia-centered trade regimes for carbon-neutral products.
[i] “China Seeks Talks with EU Over CBAM Concerns, Opposes Current Mechanism”, Commodity Insights Live, https://cilive.com/news-and-insight/metals-and-mining/041725-china-seeks-talks-with-eu-over-cbam-concerns-opposes-current-mechanism, (Date Accessed: 11.05.2025).
[ii] “China Baowu: Development and Application of Low-carbon Metallurgical Technology Based on HyCROF”, World Steel Association, https://worldsteel.org/case-studies/environment/china-baowu-development-and-application-of-low-carbon-metallurgical-technology-based-on-hycrof, (Date Accessed: 11.05.2025).
[iii] “Will China Win the Green Steel Race?”, Transition Asia, https://transitionasia.org/will-china-win-the-green-steel-race, (Date Accessed: 11.05.2025).
[iv] “EU Carbon Prices Rise Amid Volatility Sparked by Tariffs”, S&P Global Commodity Insights, https://www.spglobal.com/commodity-insights/en/news-research/latest-news/electric-power/041125-eu-carbon-prices-rise-amid-volatility-sparked-by-tariffs, (Date Accessed: 11.05.2025).
[v]“Nippon Steel Sets Green Steel Record, Faces Commercialization Hurdles”, Reccessary Industries, https://reccessary.com/en/news/world-technology/nippon-steel-sets-green-steel-record-faces-commercialization-hurdles, (Date Accessed: 25.03.2025).
