Title: Toward Decarbonized Steel Products (Part 1: Japan)
Author: Hiroko Nishida, Senior Manager (Climate Change), The Institute for Sustainable Energy Policies
Date: September 30, 2025
1. Introduction
Primary steel production, especially via blast furnaces, generates high CO₂ emissions and must be decarbonized urgently. While increasing recycled steel (from scrap) is important, global scrap availability is limited, making the decarbonization of primary steel essential.
Achieving decarbonization requires not only solving technical challenges but also supporting large-scale equipment transition, operations, and ensuring a steady market demand for low-carbon steel. “Near-zero emission steel,” where some emissions remain, represents the eventual goal. Currently, commercial-scale near-zero steel is not yet produced. Japan has introduced “mass balance” steel using certificates to virtually lower emissions, supported by government initiatives. This approach is discussed in domestic and international initiatives like IDDI, GHG Protocol, SBTi, and the World Steel Association.
2. Mass Balance Steel in Japan
The Japan Iron and Steel Federation (JISF) defined guidelines for mass balance green steel. The scheme pools emission reductions achieved by the company and allocates them to specific products via certificates. Features include:
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Reductions can be allocated within the company without requiring the product to be physically produced via the low-carbon process.
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Products’ carbon footprints can be adjusted through certificates and third-party verification.
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Multiple reduction projects can be pooled for maximum utilization.
Major steelmakers have branded these products: NS Carbolex® (Nippon Steel), JGreeneX® (JFE Steel), and Kobenable® (Kobe Steel).
Electric-arc furnace (EAF) producers also sell low-carbon steel by decarbonizing their power supply, e.g., Tokyo Steel’s “Almost Zero,” Chubu Steel Plate’s “Sumiresu,” and Yamato Steel’s “+Green.”
The government defines “GX Green Steel” and provides support measures for both supply and demand. It also includes revised Green Procurement Law and additional subsidies for clean-energy vehicles using innovative EAF steel.
3. Challenges of JISF Mass Balance Steel
Key concerns:
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Transitional measure:
Mass balance steel is temporary; prolonged use could slow real near-zero emission steel adoption. Its role should end by around 2035. Exit strategies, such as limiting virtual reductions to near-zero ranges, are needed. -
Appropriateness of reduction projects:
Reduction projects must be additional, direct, significant, and costly, and must align with companies’ decarbonization plans. Current measures include:-
Increasing scrap steel use in converters.
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Using direct reduced iron (DRI) in blast furnaces, with projects demonstrating 25% CO₂ reduction (Kobe Steel).
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Innovative EAFs replacing blast furnaces.
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Reliability of the mass balance scheme:
Transparency and traceability are essential for customer trust. Improvements include clearer allocation rules, project validity periods, and distinction between real and virtual reductions. More detailed disclosure of projects, calculation methods, and third-party verification is required.
4. Direct Reduced Iron (DRI) Projects
DRI is critical for innovative EAFs. Japanese steelmakers are pursuing DRI supply projects:
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JFE Steel: UAE project (gas-based DRI with future hydrogen transition)
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Kobe Steel: Oman project
Challenges include securing high-quality iron ore, building supply chains, and ensuring DRI availability before 2030. Learning from the U.S. Big River Steel (high scrap utilization) is valuable.
5. Conclusion
Government support and mass balance steel are helping Japan’s steel transition, but doubts about mass balance products remain. Steel companies must improve transparency and advance real decarbonization projects. Exit strategies and labeling for low-carbon steel will help guide demand. Establishing DRI supply chains and international hydrogen-DRI trade will be key for Japan and global steel decarbonization.
