At the steelworks near the German city of Salzgitter, ironmaking is a dramatic affair. Red-hot molten metal pours forth from the bottom of towering blast furnaces. The noise is deafening. Sparks fly everywhere. Soon things will be much more sedate. Seven wind turbines already tower over the site, run by a firm called Salzgitter AG. In a few years the electricity they generate will power banks of electrolysers, container-sized machines that split water into oxygen and hydrogen. The hydrogen will replace coke in reducing iron ore to iron in a new type of furnace, which will operate at much lower temperatures. Instead of CO₂, the process will emit H₂O.

The fireworks will be gone—but the climate will be grateful. Conventional steelmaking emits carbon dioxide twice over: first to generate the intense heat needed to force the coke to react with the ore in the blast furnace; then in the chemical reaction itself, as the coke snatches oxygen atoms from the ore to form iron and CO₂ as a by-product. As a result, steelmakers account for between 7% and 9% of annual global carbon emissions, about as much as India and not much less than road transport. The Salzgitter steelworks alone contribute around 1% of Germany’s total emissions. No global net-zero goal will be possible to attain if the industry’s belching is not radically reduced, says Julia Reinaud of Breakthrough Energy, a fund which invests in climate-friendly technology.

Good news, then, that global demand for green steel is growing. Rich-world consumers increasingly expect manufacturers to strive for carbon neutrality. The makers of cars, appliances and other products that use steel have thus started to look seriously for ways to decarbonise their supply chains, and are willing to pay extra for the clean stuff. Pre-sale deals of H2 Green Steel, a Swedish startup, imply a premium of 20% and 30% over the dirty metal.

Many governments are trying to chivvy the steel transition along. To bring down the cost of hydrogen, the making of which contributes two-thirds to the cost of green steel, America’s Inflation Reduction Act, a mammoth climate law passed last year, offers a production tax credit of $3 per kilogram of the gas. It also supports renewables. Not to be outdone, governments in Europe are footing part of the bill for their steel firms’ new equipment, which would run to $130bn if all of the continent’s blast furnaces were to be replaced, according to Morgan Stanley, a bank. Salzgitter’s transformation is being subsidised to the tune of €1bn ($1.1bn). Thyssenkrupp, a big German rival, may receive a similar sum.

More handouts may be on the wa