Targeted Incentives Key to Accelerating China’s Steel Sector Transition

Key Highlights

1. Despite recent policy and pilot progress, unclear standards and weak pipelines leave a gap in steel transition finance.
2. Targeted incentives such as clearer guidelines, government-led financial incentives, and coordination are needed to boost decarbonisation investment across the steel value chain.

Beijing/London, 23 Sept 2025 - The Climate Bonds Initiative today released a new report highlighting the incentives needed to drive finance for China’s steel sector decarbonisation. China produces over half of the world’s steel, with the sector contributing around 17% of national CO₂ emissions. Decarbonising this high-emission industry will require an estimated USD18bn over the next five years.

The report finds that existing policies and financial instruments are insufficient to mobilise this capital. Steelmakers face high upfront costs and uncertain returns, while access to low-carbon inputs such as scrap steel and green hydrogen remains limited. Banks and investors struggle with unclear standards and inconsistent disclosure, and downstream buyers receive few incentives to purchase low-carbon steel. Without stronger support across the value chain, low-carbon projects risk slow adoption and limited market confidence.

To address these challenges, the report calls for stronger support for steelmakers through grants, subsidies, and key inputs; clear standards, templates, and carbon accounting guidance for financial institutions; and fiscal incentives, certification, and carbon footprint tracking to boost downstream demand. Examples from Hebei province and international best practice show how these measures can scale up transition finance and accelerate the sector’s low-carbon transformation.

Wenhong Xie, Head of China Programme, Climate Bonds Initiative:

“The green transition of the steel industry not only addresses external pressures but also offers a chance to reshape market rules and value chains. With robust incentives and a coordinated ecosystem, capital can better support decarbonizing enterprises and key technologies.

Financial institutions, enterprises, and procurers must work together to reallocate and reduce the green premium of low-carbon steel, thereby bridging the gap between finance and the real economy in driving a low-carbon future.”

Download the press release here

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Contact for Interviews and further information: 

Xiaoyan Shen 

Senior Communications and Marketing Specialist, Climate Bonds Initiative 

Xiaoyan.shen@climatebonds.net

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