EU approves aid to support ArcelorMittal’s green steel demonstration plant

The European Commission has approved, under EU State aid rules, a €55 million German measure to support ArcelorMittal Hamburg GmbH in building a demonstration plant for the production of green steel using renewable hydrogen.

The measure will contribute to the achievement of the EU Hydrogen Strategy and the European Green Deal targets, while helping to reduce dependence on Russian fossil fuels and fast forward the green transition in line with the REPowerEU Plan.

Germany notified to the Commission its plan to support ArcelorMittal’s project to partially decarbonise its steel production in Hamburg.

The aid, which will take the form of a direct grant of €55 million, will support the construction and installation of a demonstration production facility using 100% renewable hydrogen. The main objective of the project is to apply technology aimed at reducing greenhouse gas emissions in ArcelorMittal’s green steel production processes. The plant will have an annual capacity of 100,000 tonnes of direct reduced iron, a key input for steel production.

This new industrial-scale demonstration plant will provide ArcelorMittal with valuable insights into the production of high-quality emissions-free steel. ArcelorMittal will use the experience gained at the demonstration plant to decarbonize its steel production in the EU on a larger scale. Moreover, ArcelorMittal has committed to share its technical know-how with other European steel producers.

The demonstration plant is envisioned to start operating in 2026.  Once completed, the project is expected to avoid the release of over 700,000 tonnes of carbon dioxide in total.

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy 2022 (‘CEEAG’).

The Commission found that:

• The project is amongst the early adopters of an innovative technology in its sector, namely technology using 100% renewable hydrogen in the production of direct reduced iron for steel.
• The measure facilitates the development of an economic activity, in particular the production of green steel. At the same time, it supports the objectives of key EU policy initiatives such as the European Green Deal, the EU Hydrogen Strategy and the REPowerEU Plan.
• The aid has an ‘incentive effect’, as the beneficiary would not carry out the investments in green steel production without the public support.
• The measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to promote the production of green steel. In addition, it is proportionate, as the level of the aid corresponds to the effective financing needs. Furthermore, if the project turns out to be very successful, generating extra net revenues, the beneficiary will return part of the aid received to Germany (claw-back mechanism).
• The aid brings about positive effects that outweigh any potential distortion of competition and trade in the EU.