Weak green steel rules could threaten South Korea’s export competitiveness

South Korea risks slowing the decarbonisation of its steel industry and weakening its international competitiveness if it adopts a weak national green steel standard, according to new analysis from climate think tank Solutions for Our Climate (SFOC).

The report warns that certification rules allowing carbon-intensive blast furnace steel to be labelled as “green” could undermine investment in genuinely low-carbon steelmaking technologies, including hydrogen-based direct reduced iron (H₂-DRI), which the government is promoting as part of its industrial transition strategy.

South Korea is the world’s sixth-largest steel producer, with the sector accounting for around 14% of the country’s greenhouse gas emissions and approximately 40% of industrial emissions. Despite growing efforts to decarbonise heavy industry, around 70% of the nation’s crude steel production still relies on conventional blast furnace processes.

The government is developing its first national green steel standard alongside the Korean Green Transformation (K-GX) programme and the proposed K-Steel Act, both of which are intended to accelerate the shift towards low-carbon steel production powered by hydrogen.

According to SFOC, the effectiveness of these initiatives will depend on whether the new certification system distinguishes genuinely low-emission steel from products that have only achieved incremental emissions reductions through conventional production methods.

The organisation argues that allowing blast furnace steel to qualify as green could weaken incentives for steelmakers to invest in transformational technologies, delaying the industry’s transition while reducing confidence among buyers and investors seeking credible low-carbon products.

The report also highlights the growing importance of robust emissions standards as international markets tighten climate-related trade requirements. Measures such as the European Union’s Carbon Border Adjustment Mechanism (CBAM) are expected to increase demand for verifiable low-carbon steel, making credible certification an increasingly important factor for exporters.

SFOC recommends that South Korea adopts clear, performance-based carbon intensity thresholds that align with emerging international frameworks developed by organisations including the International Energy Agency (IEA), ResponsibleSteel and the Low Emission Steel Standard (LESS).

The think tank also calls for product-level carbon accounting supported by physical traceability rather than mass-balance accounting systems, arguing that physical traceability provides greater transparency by directly linking emissions to individual steel products.

Chuyi Lu, Programme Officer at Solutions for Our Climate, said the decisions South Korea makes now will shape the long-term future of its steel industry. She said a credible green steel standard should reward genuine technological transformation rather than incremental improvements to conventional blast furnace production, adding that allowing mass-balance approaches to qualify as green risks weakening incentives to invest in breakthrough technologies such as hydrogen-based direct reduced iron.

With governments and manufacturers placing increasing emphasis on low-carbon supply chains, the report concludes that South Korea’s green steel standard will play a decisive role in determining whether the country’s steel industry remains competitive in global markets while supporting the transition to cleaner steel production.