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Steel mills have long been the backbone of economic power in America’s manufacturing heartland. They’ve forged the skyscrapers we admire, the cars we drive and the modern middle class. But there’s a dark side to this industrial might: climate and health-harming air pollution.

Amidst these challenges, clean hydrogen made with renewable energy is a potential game-changer for the steel industry. This colorless, odorless gas has the potential to slash toxic emissions while reducing greenhouse gases by over 90%.

Recent federal investments, including the United States Energy Department’s Hydrogen Hubs program and significant tax incentives from the 2022 Inflation Reduction Act, could position the U.S. globally to lead in clean hydrogen production. However, to realize the economic, health and climate benefits of sustainable steelmaking, the government must commit to investing in hydrogen produced from renewable energy.

Today, most iron (the precursor to steel) is made in dirty, coal-burning blast furnaces. Fortunately, modern steelmaking technology can replace fossil fuels with hydrogen, dramatically reducing health and climate-harming pollution without compromising quality. The commercial technology direct reduced iron (DRI) can be built or modified to use hydrogen to make iron.

This transition is now underway. The U.S. already has three DRI plants, and more are being announced. The Energy Department is currently in award negotiations to support two new hydrogen-ready DRI plants. First, an application in Mississippi plans to use 100% renewable hydrogen, making it the first fossil-free steel plant proposed in the U.S. Second, the steel manufacturer Cleveland-Cliffs plans to replace its Middletown, Ohio blast furnace with a DRI. But it has not yet secured a hydrogen supply.

The potential for hydrogen use in DRI is significant, and there is room to grow, especially considering the 13 operating coal-burning blast furnaces in the U.S. that currently lack transition plans. That’s why federal action on clean hydrogen is essential. The government is currently finalizing rules to define tax credits for hydrogen based on emissions. At the same time, the Energy Department announced seven projects to receive $7 billion in funds to establish hydrogen production hubs nationwide.

However, the strength of the climate protections in the tax credits are at risk, and all the proposed hydrogen hubs in steelmaking regions propose to make hydrogen with natural gas and carbon capture technology.

The potential use of natural gas to make hydrogen and the lack of information about these multi-billion-dollar hubs have raised skepticism in communities already negatively impacted by steel industry pollution. Despite decades of investment, carbon capture technology has not proven it is economically viable in the real world. Ultimately, natural gas with carbon capture also doesn’t address the upstream health and climate-harming air pollution from fracking for natural gas to produce hydrogen and continues our reliance on fossil fuels.

In contrast, wind and solar energy installed to power hydrogen production via a process called electrolysis would have a fraction of natural gas’s climate, environmental and health impacts.

To be sure, converting all steelmaking operations to run on renewable hydrogen would require vast amounts of new renewable energy resources to come online to support the dozens of gigawatts of additional load needed to produce the hydrogen cleanly. Achieving that scale is a challenge and a boon for clean energy companies and electric utilities. Capital costs are also significant; the last DRI built in the U.S. cost $1 billion.

With renewable hydrogen, U.S. steelmakers can participate in the global green steel boom and earn a premium for their products. Steelmakers in Sweden have secured a 30% price bump due to the green accolades of their pre-production steel made with renewable hydrogen, indicating key corporate customers may be willing to pay more for sustainable steel.

The benefits of investing in green steel then have a cascading effect. The automotive industry, which needs the product to meet its climate commitments, can reduce embodied emissions by an estimated 27%. Regional analyses from Indiana and Pennsylvania underscore that investing in green steel also means investing in jobs and economic growth.

We are at a critical juncture for the future of steel and hydrogen. As the Energy Department finalizes the hydrogen tax credit and advances funding for the hubs, establishing a leading clean steel industry should be top of mind.