Financing the decarbonisation of China’s steel industry: technology, policy and instruments

The report highlights that China's steel sector requires at least CNY1.6tn (USD220bn) in fixed-asset investment for decarbonisation by 2050. While the labelled bond and loan markets have the capacity to provide this capital, current issuance from the steel sector is minimal, representing only 0.1% of the Chinese labelled bond market. The document recommends aligning provincial transition finance guidelines with national and international standards, encouraging the use of greenhouse gas (GHG) emission-reduction targets in sustainability-linked bonds (SLBs), and implementing green public procurement to stimulate demand for low-carbon steel.

• China's steel industry faces a massive reinvestment need by 2030, with 78% (730.8 Mt/yr) of existing coal-based blast furnace capacity requiring investment to transition to low-carbon technologies.
• Decarbonising the Chinese steel sector by 2050 requires an estimated fixed-asset investment of at least CNY1.6tn (USD220bn). This investment is distributed across energy efficiency (33%), electric arc furnaces (23%), direct iron reduction (18%), CCUS (14%), blast furnace hydrogen injection (7%), and pellet manufacturing (5%).
• Despite the scale of the Chinese labelled bond market, the steel sector's participation is extremely low; by the end of 2023, steel issuers had produced only 23 green bonds and six sustainability-linked bonds, totaling 0.1% of the total Chinese labelled bond market volume.
• Green hydrogen is identified as a critical technology for deep decarbonisation, capable of reducing steel production emissions by up to 98%. Costs are projected to fall from an average of 4-6 USD/kg to below 2 USD/kg by 2030, with a specific China projection of 2.18 USD/kg by 2030.
• Current sustainability-linked bonds (SLBs) in the Chinese steel sector often use pollutants as key performance indicators (KPIs) rather than greenhouse gas metrics. The report recommends that issuers shift to KPIs directly related to GHG emission-reduction targets to ensure alignment with Paris-compatible goals.
• Green public procurement (GPP) is a significant lever for demand; Chinese public authorities procure approximately 350 Mt of steel annually, causing around 689 Mt of CO2 emissions. However, there are currently no mandatory requirements regarding the emission intensity of steel used in public procurement.
• International carbon pricing mechanisms, specifically the EU Carbon Border Adjustment Mechanism (CBAM), create operating pressure on Chinese steel companies. China accounted for approximately EUR7.4bn (USD8.1bn) in iron and steel exports to the EU in 2022.

APA

Passaro, F., Chao, M., Xu, X., Xie, W., Van Coppenolle, M., & Yu, H. (2024). Financing the decarbonisation of China’s steel industry: technology, policy and instruments. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Financing-the-decarbonisation-of-China%E2%80%99s-steel-industry-Technology-policy-and-instruments-%E4%B8%AD%E5%9B%BD%E9%92%A2%E9%93%81%E8%A1%8C%E4%B8%9A%E8%84%B1%E7%A2%B3%E8%9E%8D%E8%B5%84%EF%BC%9A%E6%8A%80%E6%9C%AF%E3%80%81%E6%94%BF%E7%AD%96%E5%92%8C%E9%87%91%E8%9E%8D%E5%B7%A5%E5%85%B7_2025-02-17-162817_yoce.pdf

Chicago

Passaro, Fabio, Minne Chao, Xiaoyun Xu, Wenhong Xie, Magali Van Coppenolle, and Hao Yu. Financing the decarbonisation of China’s steel industry: technology, policy and instruments. Climate Bonds Initiative, 2024. https://www.climatebonds.net/files/documents/publications/Financing-the-decarbonisation-of-China%E2%80%99s-steel-industry-Technology-policy-and-instruments-%E4%B8%AD%E5%9B%BD%E9%92%A2%E9%93%81%E8%A1%8C%E4%B8%9A%E8%84%B1%E7%A2%B3%E8%9E%8D%E8%B5%84%EF%BC%9A%E6%8A%80%E6%9C%AF%E3%80%81%E6%94%BF%E7%AD%96%E5%92%8C%E9%87%91%E8%9E%8D%E5%B7%A5%E5%85%B7_2025-02-17-162817_yoce.pdf.

Wikipedia

{{cite report |last1=Passaro |first1=Fabio |last2=Chao |first2=Minne |last3=Xu |first3=Xiaoyun |last4=Xie |first4=Wenhong |last5=Van Coppenolle |first5=Magali |last6=Yu |first6=Hao |title=Financing the decarbonisation of China’s steel industry: technology, policy and instruments |publisher=Climate Bonds Initiative |date=September 2024 |url=https://www.climatebonds.net/files/documents/publications/Financing-the-decarbonisation-of-China%E2%80%99s-steel-industry-Technology-policy-and-instruments-%E4%B8%AD%E5%9B%BD%E9%92%A2%E9%93%81%E8%A1%8C%E4%B8%9A%E8%84%B1%E7%A2%B3%E8%9E%8D%E8%B5%84%EF%BC%9A%E6%8A%80%E6%9C%AF%E3%80%81%E6%94%BF%E7%AD%96%E5%92%8C%E9%87%91%E8%9E%8D%E5%B7%A5%E5%85%B7_2025-02-17-162817_yoce.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{passaro2024financing, author = {Passaro, Fabio and Chao, Minne and Xu, Xiaoyun and Xie, Wenhong and Van Coppenolle, Magali and Yu, Hao}, title = {{Financing the decarbonisation of China’s steel industry: technology, policy and instruments}}, institution = {Climate Bonds Initiative}, year = {2024}, month = sep, url = {https://www.climatebonds.net/files/documents/publications/Financing-the-decarbonisation-of-China%E2%80%99s-steel-industry-Technology-policy-and-instruments-%E4%B8%AD%E5%9B%BD%E9%92%A2%E9%93%81%E8%A1%8C%E4%B8%9A%E8%84%B1%E7%A2%B3%E8%9E%8D%E8%B5%84%EF%BC%9A%E6%8A%80%E6%9C%AF%E3%80%81%E6%94%BF%E7%AD%96%E5%92%8C%E9%87%91%E8%9E%8D%E5%B7%A5%E5%85%B7_2025-02-17-162817_yoce.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }