Defossilizing Industry Scaling-up CCU 2025

ArcelorMittal and LanzaTech’s Steelanol collaboration proves CCU at scale but runs into regulatory challengesBOX 5: LanzaTech and ArcelorMittal teamed up over a decade ago on the Steelanol project at ArcelorMittal’s Ghent steelworks. Unique in Europe, this project converts blast furnace gases – containing CO, CO2 and H2 – into ethanol for fuel and materials. This initiative has offered ArcelorMittal an exploratory step towards their 2050 net-zero target and allowed LanzaTech to scale up their gas fermentation technology in Europe. The collaboration began with small-scale mobile unit tests. Following their success, the partners moved to a large-scale demonstration, supported initially by Horizon 2020 funding from the EU. This grant helped the partners navigate the engineering phase of their plant. Regulatory hurdles arose, particularly with fuel certification challenges under what was then RED II regulation, because the blast furnace gas was not biogenic. As a solution, the Torero project was born, generating bio-coal onsite to inject biogenic carbon back into the process. This development helped certify the ethanol as an advanced biofuel, unlocking further financial support from the European Investment Bank. A pivotal achievement for LanzaTech and ArcelorMittal was the inclusion of a new fuel category under the revised RED II regulation – known as recycled carbon fuels (RCF). RCFs describe carbon-based fuels made from non- intentionally produced waste streams, offer another certification pathway under EU legislation.Unexpected regulatory shifts, however, complicated the sale of bioethanol, deviating ArcelorMittal from its initial business projections of using biogenic off-gases from the Torero project. Additionally, RCF production faced challenges due to penalties reflecting the carbon intensity of local power grids, directly affecting environmental LCA outcomes for the produced ethanol. ArcelorMittal’s substantial investments, supported by a €10 million Horizon 2020 grant and a loan from the EIB, aimed to set a sustainable industry standard. However, the evolving regulatory landscape continues to pose financial risks and could stifle the investments and innovation needed to meet the EU’s climate targets. In June 2025, ArcelorMittal publicly urged EU authorities to swiftly address these issues to maintain the viability of the Steelanol and Torero projects. Looking ahead, the partnership plans to diversify by leveraging its ISCC+ certification for sustainable chemicals and exploring ethanol markets outside the EU, including sustainable aviation fuels. This approach aims to mitigate the potential setbacks from the EU’s challenging regulatory environment and maintain the momentum towards sustainable industrial innovation. Source: Wood Mackenzie, expert interviews with LanzaTech and ArcelorMittal. Sites and strategies to mitigate scale-up risk The ideal demonstration site and scaling-up strategy will depend on the CCU pathway and target market opportunity. For example, start-ups producing CO2-treated building materials require access to local sources of feedstocks and/or offtake. Developing flexible deployment models, such as container-based “hardware-as-a-service” approaches, can help to better target dispersed industrial sites and reduce costs associated with transporting materials. In other settings, such as pathways targeting chemical industry supply chains, the ability to achieve relevant scale quickly is a core driver. In this instance, scaling- up niches can be found where there is the right combination of local infrastructure and abundant low-carbon feedstocks. At the early stage, CCU projects can face offtaker risk as they are reliant on only a few or even a single customer. Innovators are targeting sites which have multiple end-uses for utilization products to help mitigate this risk. For example, CCU technologies producing sustainable feedstock gases for chemical industries are particularly well placed to fill this niche. However, for other pathways, trialling technology deployments in different industrial contexts simultaneously may be the best route to diversifying offtake (see Box 6). Defossilizing Industry: Considerations for Scaling-up Carbon Capture and Utilization Pathways 29