[C Tech Now] Germany's Steel Production 'Half of Korea's', but Hydrogen Reduction Steelmaking Budget is 38 Times Higher

Japan Provides 4 Trillion KRW Support via GI Fund
Germany Allocates 10.2 Trillion KRW for Low-Carbon Facilities
South Korea's Budget Only 268.5 Billion KRW

Comparison of Government Subsidies for Decarbonization and Production Volume in the Steel Industry. Image source=Climate Solutions

"Government subsidies are absolutely necessary for initial research and development and the transition to low-carbon facilities."

Jinchan Bae, Head of the POSCO Hi-REX Promotion Team (Executive Director), who participated as a presenter at the 'Steel Decarbonization Measures Forum' hosted by the National Assembly Climate Crisis Decarbonization Economic Forum and organized by Climate Solutions last September, emphasized that government subsidies are crucial for the domestic commercialization of hydrogen reduction steelmaking.

In the case of POSCO, it is estimated that about 20 trillion KRW will be needed by 2050 for the development of Hi-REX technology and facility conversion. Including the construction of facilities and infrastructure for low-carbon steel production such as electric furnaces, the transition cost for carbon neutrality by 2050 is expected to reach 40 trillion KRW. However, the government budget confirmed so far for this purpose is only 26.9 billion KRW. The Ministry of Trade, Industry and Energy is conducting a preliminary feasibility study on the hydrogen reduction steelmaking demonstration project, with a budget scale of 900 billion KRW.

Korea's government support for hydrogen reduction steelmaking is far insufficient compared to major overseas countries. According to a survey by Climate Solutions, Japan established a Green Innovation (GI) Fund worth 2 trillion yen (about 180 trillion KRW) in March 2021 and began extensive support for 14 sectors including steel, hydrogen, and batteries. Among these, the 'Research and Development Project for Hydrogen Utilization Technology in Steelworks' is invested with a total of 449.9 billion yen (about 4 trillion 49 billion KRW). In the Green Transformation (GX) Promotion Strategy announced in July 2023, Japan declared an investment of 256.4 billion yen (about 2 trillion 370.6 billion KRW) in research and development of direct reduction steelmaking technology.

The United States announced in March this year that it will provide a total of 6 billion USD (about 8.4 trillion KRW) in federal funds to reduce carbon emissions in the industrial sector. A total of 33 projects were selected for this purpose, among which two projects producing low-carbon steel using hydrogen secured investments of up to 1 billion USD (about 1.34 trillion KRW).

Germany plans to sequentially replace six existing coal-based blast furnaces with low-carbon steel production facilities starting in 2026, and intends to invest more than 10.2 trillion KRW in government support for this.

In comparison, the budget for low-carbon steel technology development reflected by the Korean government last year was only 268.5 billion KRW. Although Germany's steel production volume is 52% of Korea's, it allocated about 38 times more government budget.

The report "Green Steel Economics," published in July this year by Global Efficiency Intelligence, Transition Asia, and Climate Solutions, stated that "Mitigating the financial risks of green hydrogen reduction steelmaking technology is key to transitioning to green steel," and emphasized that "It is very important to secure funding for hydrogen reduction steelmaking projects by utilizing both public and private funds."