The European steel sector is responsible for around 8% of the EU’s CO₂ emissions, making its decarbonisation critical to achieving climate and industrial goals. This policy paper explores the potential role of public procurement in stimulating demand for low-carbon steel, in light of recent EU initiatives such as the Clean Industrial Deal (CID), the forthcoming Industrial Accelerator Act, and planned revisions to procurement rules. These measures aim to create lead markets by integrating sustainability criteria into purchasing decisions.
While public procurement accounts for approximately 14% of EU GDP, its ability to drive demand for low-carbon steel varies significantly across market segments. Construction – by far the largest consumer of publicly procured steel – already relies heavily on long products produced via scrap-based electric arc furnaces (EAF), which emit far less CO₂ than traditional blast furnace-basic oxygen furnace (BF-BOF) routes. This limits the additional impact procurement can have in this segment.
Conversely, the automotive sector, which consumes high-quality flat steel, offers greater potential to accelerate uptake of near-zero steel produced via innovative processes such as hydrogen-based direct reduced iron (H₂-DRI-EAF). However, public procurement of vehicles represents only a small fraction of EU steel demand, making it insufficient to create lead markets on its own.
The paper concludes that public procurement measures alone are unlikely to validate business cases for premium low-carbon steelmaking. To strengthen demand signals, complementary actions are recommended, such as introducing low-carbon or recycled content requirements for automobiles and incentivising advanced scrap sorting technologies. These targeted interventions would help unlock investment in cleaner steel production and support the EU’s climate objectives.
Institutional investors strongly back these policy directions and emphasise the need for granular, sector-specific approaches to accelerate the steel value chain’s transition. This analysis builds on IIGCC’s ongoing work to identify effective policy levers for industrial decarbonisation and provides insights for policymakers, investors, and industry stakeholders navigating the next phase of Europe’s clean industrial strategy.