The iron and steel industry’s emissions are at the heart of our climate challenge, pumping out some 2.6 bn tons of carbon dioxide a year and accounting for 7% of global energy-related emissions, according to the International Energy Agency’s (IEA) Iron and Steel Technology Roadmap (pdf). To meet the IEA’s net zero targets by 2050, the sector as a whole needs to reduce emissions 25% by 2030 and 91% by 2050 from a 2022 baseline. However, the sector is notoriously energy-intensive, with no easy routes to greener production lines.

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Egypt’s iron and steel industry, in particular, will come under increased focus with the launch of the Carbon Border Adjustment Mechanism (CBAM) at the start of next year, with the sector’s exports to the EU — reaching USD 862.9 mn in 2024, according to UN Comtrade data — potentially set for a major disruption. Steel and iron exports, along with fertilizers, cement, and aluminum, heading to the EU will have a carbon mission tax imposed on them starting 1 January, followed by a similar program for exports to the UK at the start of 2027.

But first, what exactly is the CBAM? Often referred to as the carbon border tax, the CBAM is a carbon emission tax imposed on goods that are imported into the EU. It is designed to put a “fair price” on emissions from the production of carbon-intensive goods that are imported into EU member countries and aims to “encourage cleaner industrial production in non-EU countries,” according to the EU Commission. The carbon border tax will make up the difference between the local carbon price — if there is one — and the EU’s carbon price.

Egypt and its MENA neighbors have the potential to become a powerhouse of green steel and iron, according to a new policy paper (pdf) by the Carboun Institute. Cheap renewables and green hydrogen, entrenched direct reduced iron capacity, and central geography can help the region not just adjust to the incoming CBAM, but establish a promising new industry.

Green steel and iron isn’t an alien concept to Egypt, with companies like Jindal Steel and Power announcing their interest in setting up complexes fueled by renewables like green hydrogen, often with exports in mind.

And the Carboun Institute is not the first to suggest that the region is a good candidate for a green iron and steel industry. The Institute for Energy Economics and Financial Analysis highlighted in a 2023 report (pdf) our abundant solar resources and an already established iron market that can be gradually transitioned to clean energy. The Institute also argued that focusing on exporting green iron and steel makes more financial sense than the en vogue push to export green hydrogen.

One reason why the steel and iron industry makes up around a quarter of global industrial emissions is its reliance on coal, but this is also what could give the region’s green steel and iron industry an edge. The region accounts for just 3.6% of global crude steel output, but the direct reduced iron market — known as DRI — produced 44% of the world’s DRI last year, accounting for some 62.5 mn tons, according to the Carboun Institute. Egypt leads the region in DRI capacity, behind only Iran.

Unlike other methods, DRI technology normally uses natural gas as its feedstock, which is cleaner than more traditional methods of producing iron using coal. Natural gas still pollutes, but what DRI technology offers Egypt and the region is an easy route to replace natural gas with green hydrogen as its feedstock, opening the door to green steel. Competitors in Europe, China, and elsewhere, on the other hand, have a longer road to creating a green industry, as they have to create new plants to incorporate green hydrogen as an input.

The region’s renewables potential also gives the region an edge, opening the door up to cheaper green hydrogen production and, in turn, a more competitive green steel and iron industry, according to the report. The region receives 22-26% of the world’s solar energy, and many areas — including the Gulf of Suez — are perfect sites for wind projects.

As proof of concept, Saudi Arabia’s Al Shuaibah solar complex boasts the world’s cheapest solar-produced electricity at just USD 0.0104/kWh in 2025. The Kingdom’s Al Ghat wind farm also boasts the world’s cheapest wind power at USD 0.0156/kWh. Considering that 50% of green hydrogen costs stem from the cost of renewables, cheaper renewables can mean significantly cheaper green hydrogen for the green steel and iron industry.

The region — and Egypt, in particular, thanks to the Suez Canal — is also in a prime position to give it a major logistical edge, with ports in the region able to reach Asia or Europe in a much quicker time than suppliers further afield. Cutting down freight times also helps trim fuel consumption and improves warehousing strains.

Shorter routes to markets also reduce emissions, which is taken into account by carbon tariffs that factor in the emissions by the time the product lands at the intended market. The region’s role in planned green iron hubs will only grow, according to the report.

Your top green economy stories for the week:

  • Chinese renewables firm Sungrow has broken ground on the USD 120 mn first phase of its battery storage factory, which is expected to launch with a production capacity of 2 GW.
  • French renewables firm Voltalia plans to invest USD 250 mn to develop its 3.2 GW renewables Suez project with Taqa Arabia. The project to repower the existing 545 MW Zafarana wind farm with 1.1 GW of wind and 2.1 GW of solar power is expected to cost more than USD 2 bn.
  • Carbon bonds for GEM? The environment and tourism ministries are coordinating with the Grand Egyptian Museum’s management to issue carbon bonds once it receives all required international emissions certifications.
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