How does CO2 to CO conversion help reduce a steel plant's ETS obligations?

CO2 to CO conversion directly reduces a steel plant’s verified emissions under the EU Emissions Trading System by recycling CO2 that would otherwise be counted as a released greenhouse gas. When captured CO2 is converted into carbon monoxide and fed back into the steelmaking process as a feedstock, the plant emits less CO2 per tonne of steel produced, which translates into fewer ETS allowances required and a lower carbon cost. The sections below unpack exactly how that calculation works, what volumes are realistic, and what additional financial benefits come alongside reduced ETS exposure.

How does the EU ETS actually calculate a steel plant’s carbon cost?

The EU Emissions Trading System calculates a steel plant’s carbon cost by multiplying its verified annual CO2 emissions by the current market price of an ETS allowance (EUA). Each allowance covers one tonne of CO2. Plants receive a portion of allowances for free based on benchmark performance and must purchase the rest on the carbon market. The wider the gap between free allocations and actual emissions, the higher the compliance cost.

Steel production is one of the most carbon-intensive industrial processes in Europe. Blast furnace operations emit CO2 both from burning coke as a reducing agent and from the combustion of process gases. Under the ETS, every tonne of CO2 that leaves the plant boundary as a verified emission must be covered by an allowance. Free allocations are benchmarked against the best-performing facilities in the sector, so plants that emit more than the benchmark must buy additional allowances at market prices, which have historically ranged from roughly €25 to over €100 per tonne depending on the year.

The practical implication is straightforward: a steel plant that reduces its verified emissions reduces its purchased allowance requirement in direct proportion. If a plant currently buys 200,000 allowances per year and reduces verified emissions by 50,000 tonnes, it buys 50,000 fewer allowances. At €70 per tonne, that is €3.5 million in avoided carbon cost annually. This linear relationship means that any technology capable of genuinely reducing verified emissions creates an immediate and quantifiable financial return.

How does converting CO2 to CO reduce verified emissions under the ETS?

Converting CO2 to CO reduces verified emissions under the ETS because the captured CO2 is no longer released into the atmosphere; it is chemically transformed into a useful feedstock and re-enters the production process. Under EU monitoring, reporting, and verification rules, CO2 that is demonstrably utilized rather than emitted can be excluded from a plant’s verified emission total, directly lowering the allowance obligation.

The mechanism works as follows. A steel plant captures CO2-rich off-gases from its blast furnace or direct reduction operations. Those gases are fed into an electrified plasma reactor, which uses renewable electricity to break the CO2 molecule and produce carbon monoxide. That carbon monoxide is then recycled back into the steelmaking process as a reducing agent, replacing coke-derived CO. Because the CO2 never enters the atmosphere, it is not counted as an emission in the plant’s annual verified report.

D-CRBN’s Plasma ARC™ technology demonstrated a 90.5% CO2 conversion rate in a single pass during pilot testing at an integrated steel facility, with an energy requirement of 1,100 kWh per tonne of CO2 processed. That conversion efficiency is critical: a low conversion rate would leave a large fraction of the captured CO2 unprocessed and still emitted, diluting the ETS benefit. At 90.5% single-pass conversion, the vast majority of captured CO2 is transformed into usable CO rather than vented.

It is also worth noting that the carbon monoxide produced replaces fossil-derived reducing agents. This creates a secondary emissions reduction: the plant consumes less coke or natural gas, which would themselves have generated CO2 emissions. Both effects, the avoided CO2 release and the reduced fossil input, contribute to a lower verified emission total, though the accounting treatment of each must comply with the applicable ETS monitoring plan and the relevant implementing regulation.

What volume of CO2 can a steel plant realistically convert per year?

A steel plant can realistically convert tens of thousands to hundreds of thousands of tonnes of CO2 per year depending on the scale of deployment. D-CRBN’s modular SPARC reactor design supports configurations below 100 ktpa for distributed or phased deployment, and above 100 ktpa for large-scale integration into high-volume steelmaking operations. The modular architecture means capacity scales incrementally without requiring a single large capital commitment upfront.

The starting point for any volume estimate is the plant’s available CO2-rich off-gas stream. Blast furnace gas typically contains a significant fraction of CO2 alongside CO, nitrogen, and hydrogen. The plasma reactor can operate effectively with diluted CO2 streams containing up to 50% nitrogen, which means it does not require a pure CO2 feed and can process off-gases directly without extensive upstream purification. This broadens the volume of gas that is practically processable and reduces the infrastructure burden on the plant.

A useful reference point from D-CRBN’s technology specifications is that the system can convert approximately 2,000 tonnes of CO2 annually per square meter of installation footprint. This high volumetric throughput means that even a relatively small physical installation can process meaningful quantities of CO2. A steel plant with available roof or yard space of, for example, 50 square meters dedicated to plasma units could target around 100,000 tonnes of CO2 conversion per year, a volume that represents a substantial reduction in ETS allowance purchases at any realistic carbon price.

Deployment is also designed to be additive rather than disruptive. The electrified CO production system arrives in modular units, integrates directly into existing gas handling infrastructure, and does not require the plant to write off or replace existing assets. This plug-and-play characteristic allows steel operators to begin at a scale that matches their current CO2 capture capacity and expand as that capacity grows.

Does CO2 utilization count toward ETS compliance the same way CCS does?

CO2 utilization and carbon capture and storage (CCS) are treated differently under the EU ETS, but both can result in verified emission reductions when properly documented. CCS permanently removes CO2 from the atmosphere by storing it geologically. CO2 utilization converts CO2 into a product, and whether the resulting emission reduction is recognized under the ETS depends on whether the CO2 remains permanently bound in the product or is eventually re-emitted during product use.

For steel plants using CO2-to-CO conversion, the relevant factor is that the CO2 is chemically transformed and the resulting carbon monoxide is consumed within the same industrial process as a reducing agent. This is distinct from producing, say, a polymer where the carbon is locked into the material for decades. The ETS monitoring framework requires plants to account for carbon flows accurately, and the specific treatment of CCU outputs is governed by the plant’s approved monitoring methodology.

What makes CO2 utilization particularly compelling relative to CCS is the absence of storage infrastructure costs and the positive economic return from the output. CCS requires compression, transport, and permanent geological storage, all cost centers with no revenue offset. CO2 recycling via plasma conversion produces carbon monoxide that has direct market value as a chemical feedstock or steelmaking input, turning a compliance cost into a productive asset. The technology removes the need for carbon storage entirely by converting CO2 directly into a usable molecule at the point of emission.

Steel operators evaluating their compliance strategy should work with their ETS verifier and the relevant national competent authority to confirm the precise accounting treatment applicable to their monitoring plan. The regulatory framework for CCU is continuing to develop at EU level, and early engagement with verifiers during project design is advisable.

What other cost benefits come alongside lower ETS exposure?

Beyond reduced ETS allowance purchases, CO2 to CO conversion delivers several additional financial benefits: it replaces fossil-derived feedstocks with on-site-produced carbon monoxide, reducing procurement costs and exposure to volatile fossil fuel prices; it can lower energy costs by running on surplus renewable electricity; and it strengthens supply chain resilience by reducing dependence on imported carbon feedstocks.

Fossil feedstock replacement and price stability

Carbon monoxide produced from CO2 recycling directly substitutes for CO sourced from fossil-based processes. For a steel plant, this means a portion of the coke or natural gas that would otherwise be purchased to generate reducing agents can be displaced by on-site electrified production. As fossil feedstock prices fluctuate with global energy markets and geopolitical conditions, an on-site plasma system provides a degree of cost predictability that fossil procurement cannot. The input cost of the plasma process is primarily electricity, and when that electricity comes from renewable sources, or from periods of grid surplus when prices are low, the cost of producing CO can be highly competitive with fossil-derived alternatives.

Energy cost optimization through flexible operation

D-CRBN’s plasma reactor can be switched on and off rapidly, which allows it to operate preferentially during periods when renewable electricity is abundant and grid prices are low. This flexibility, which can be managed through AI-assisted dispatch, means the system can function as a form of chemical energy storage: excess wind or solar electricity that would otherwise be curtailed is instead stored as carbon monoxide. For a steel plant that is already managing significant electricity consumption, integrating a plasma unit that absorbs low-cost surplus power converts an operational challenge into a cost advantage.

Supply chain resilience and regulatory positioning

Reducing dependence on imported fossil feedstocks improves a steel plant’s resilience to supply disruptions and geopolitical volatility, a concern that has become increasingly material for European industrial operators in recent years. On-site CO production from captured CO2 creates an alternative supply route that is independent of global commodity markets. Additionally, as EU carbon regulations tighten and the Carbon Border Adjustment Mechanism (CBAM) extends its reach, steel producers with demonstrably lower carbon intensity per tonne of output will be better positioned competitively, both in European markets and in export markets where carbon content is increasingly scrutinized.

For steel operators ready to quantify these benefits for their specific site, D-CRBN offers detailed benchmarking of its electrified CO production against conventional feedstock routes, including CAPEX and OPEX comparisons with reverse water-gas shift and other competing technologies. The company’s modular systems are designed for direct integration into existing infrastructure, making it possible to begin converting CO2 into a competitive advantage without disrupting current operations. To explore what an on-site electrified syngas or CO system could mean for your plant’s ETS position and feedstock strategy, the D-CRBN team is available to discuss your site’s specific parameters.

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