The steel industry is a major contributor to China’s industrial sector emissions, addressing these emissions are crucial to advance the country’s carbon peaking and neutrality goals. Furthermore, steel is one of the most widely used industrial raw materials, making the low-carbon transition of steel products imperative for achieving climate targets in downstream industries.

Fortunately, demand-side companies are emerging as key drivers of the steel industry’s low-carbon transition. By procuring low-carbon steel, downstream companies can not only significantly reduce their product carbon footprint but also incentivize steel producers to accelerate the development and adoption of green technologies.

This report focuses on the automotive sector as a representative case, providing an in-depth analysis of the opportunities, challenges, and practical pathways for procuring low-carbon steel to support collaborative carbon reduction across the steel industry and its downstream sectors.

Unifying definitions and standards

Current standards for low-carbon steel are fragmented globally, with inconsistent definitions and accounting methods. Terms are used interchangeably, and variations exist in accounting boundaries, greenhouse gas types, offset rules, and certification mechanisms. This report proposes actionable recommendations, including establishing internationally recognized evaluation standards and certification mechanisms for low-carbon steel, as well as promoting joint development of supply chain carbon footprint accounting guidelines.

Realizing low-carbon value

In terms of economic feasibility, increased costs are a key challenge in advancing low-carbon procurement. Based on the cost increases and carbon reduction ratios of different technical routes, the report correlates each route with the carbon efficiency levels defined in the widely adopted domestic “Evaluation Method of China to Future Steel” (C2F Steel). It analyzes the cost profiles, driving factors, and evolving trends across these levels.

The report recommends strengthening collaborative mechanisms in the steel value chain for low-carbon transition, leveraging the proactive role of the demand side in steel sector decarbonization. By integrating procurement mechanisms such as demand aggregation and long-term procurement, it proposes exploring steel-automotive partnerships as pilot practices for low-carbon procurement, gradually establishing a sustainable model for coordinated carbon reduction across the industrial chain.

Special thanks to the HSBC Bank (China) Company Limited and SEE Foundation for their support on this report.