German auto giant Mercedes-Benz and Sweden's H2 Green Steel Group announced Wednesday an agreement to supply 50,000 tons of carbon-free steel per year by 2025, of which Sweden is one of the pioneers. H2 Green Steel, whose first plant is under construction in the north of the Scandinavian country, will use hydrogen from renewable sources to produce steel, eliminating the highly polluting coal used in large quantities by the global steel industry. An existing preliminary agreement "has resulted in a binding agreement for volumes of 50,000 tons per year, which will be produced in Boden in northern Sweden, at H2 Green Steel's iron and steel plant running on green hydrogen," the two companies said in a joint statement.
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At around 900 kilos of steel per vehicle according to industry figures, the contract would produce some 55,000 cars with low-CO2 steel, for total Mercedes-Benz sales of around 2 million units last year. A preliminary agreement has also been signed to produce "green steel" for Mercedes-Benz in North America, the two groups say. No financial details were released. The H2 Green Steel method claims a 95% reduction in emissions compared to the traditional route. The latter alone accounts for between 7 and 9% of human CO2 emissions worldwide, according to the World Steel Association, constituting a major source in the fight against climate change.
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The main obstacle to the development of this technology is the high consumption of electricity required to produce steel in very large quantities, experts point out. One of the largest investors in H2 Green Steel is the investment company Vargas, which is behind the development of Swedish battery producer Northvolt. H2 Green Steel has just received environmental approval from Sweden to launch its Boden plant, which according to the latest schedule is expected to start in 2025. Its capacity can be up to 5 million tons per year, according to the company. The company is not the only one in the region to rely heavily on "green steel". Swedish steelmaker SSAB, together with iron miner LKAB and electricity producer Vattenfall, operates a pilot plant that already produces carbon-free steel using renewable hydrogen. A larger consortium plant is due to open in 2026.