Deep dive: low-carbon materials (cement, steel, timber) — where the value pools are (and who captures them)

The decarbonization of heavy industry represents one of the most significant investment opportunities of the coming decade. Cement, steel, and timber collectively account for approximately 15% of global CO2 emissions, yet these sectors are undergoing rapid transformation driven by regulatory pressure, technology innovation, and shifting procurement requirements. Understanding where value will concentrate across the low-carbon materials landscape is essential for investors, corporate strategists, and sustainability professionals navigating this transition.

Why It Matters

The low-carbon materials transition is not merely an environmental imperative but a fundamental restructuring of industrial value chains worth hundreds of billions of dollars. The green steel market alone is projected to grow from $4.8 to $7.4 billion in 2024 to $189.8 billion by 2032, representing a compound annual growth rate (CAGR) of 60.4%. Simultaneously, the low-carbon cement market is expanding from $2.03 billion in 2024 toward $5.88 billion by 2034, with an 11.2% CAGR.

These figures represent more than market growth projections. They signal a fundamental reallocation of industrial profits toward companies that can deliver verified emissions reductions at competitive costs. The European Union's Carbon Border Adjustment Mechanism (EU CBAM), which began its transitional phase in 2023 and enters full implementation by 2026, creates direct financial consequences for carbon-intensive imports. Companies unable to demonstrate low-carbon credentials face escalating cost penalties that erode competitive position.

The First Movers Coalition, a public-private partnership launched at COP26, has established procurement commitments requiring members to source 10% near-zero cement by 2030. With coalition members representing over $8 trillion in market capitalization, these demand signals are reshaping supplier investment decisions and accelerating technology deployment timelines.

The automotive sector, representing 39.2% of green steel end-use demand, is driving particularly aggressive procurement timelines as manufacturers seek to decarbonize vehicle production. European markets lead adoption with 39.6% of the global green steel market share, establishing regional competitive advantages that will prove difficult to replicate.

Key Concepts

The Three Pillars of Low-Carbon Materials

Low-Carbon Cement addresses the 7-8% of global CO2 emissions attributable to cement production. The emissions profile stems from two sources: calcination of limestone (process emissions) and fossil fuel combustion for kiln heating. Decarbonization pathways include low-clinker blends that substitute materials like fly ash or slag, carbon capture utilization and storage (CCUS) retrofits, and novel chemistries that eliminate or reduce calcination requirements entirely. Key industry players including Holcim, Heidelberg Materials, Cemex, and CRH are investing billions across these technology pathways.

Green Steel tackles the roughly 7% of global emissions from steel production. Traditional blast furnace-basic oxygen furnace (BF-BOF) routes rely on metallurgical coal as both fuel and chemical reductant. The transition involves two parallel pathways: electric arc furnace (EAF) production using recycled scrap, and hydrogen-based direct reduced iron (H2-DRI) coupled with EAF finishing. H2-DRI technology can achieve up to 95% emission reductions compared to conventional production. Major players including ArcelorMittal, H2 Green Steel, Nucor, SSAB, and Nippon Steel are positioning for this transition.

Mass Timber encompasses engineered wood products including cross-laminated timber (CLT), glued laminated timber (glulam), and laminated veneer lumber (LVL). Unlike cement and steel, timber offers carbon sequestration benefits, storing approximately 1 tonne of CO2 per cubic meter of wood. Mass timber is increasingly viable for mid-rise construction up to 18 stories, displacing carbon-intensive concrete and steel in structural applications.

Value Chain Positioning

Value capture in low-carbon materials depends critically on positioning within the technology and production stack. Three distinct value pools are emerging:

Technology Providers capturing licensing fees, equipment sales, and engineering services. Companies developing proprietary CCUS systems, novel cement chemistries, or hydrogen electrolysis technology command premium valuations based on intellectual property moats. Startups such as Sublime Systems, Fortera, and Brimstone represent this category in cement, developing electrochemical processes and alternative feedstocks that fundamentally alter production economics.

Low-Carbon Producers operating facilities with verified emissions reductions. First movers establishing production capacity benefit from green premiums while regulatory pressure expands the addressable market. The current 20-40% price premium for CCUS-enabled cement reflects willingness-to-pay among early adopters, though premiums will compress as supply scales.

Certification and Verification Services providing the measurement, reporting, and verification (MRV) infrastructure essential for premium capture. Environmental Product Declarations (EPDs) and third-party certifications enable differentiated pricing by quantifying and communicating embodied carbon reductions.

What's Working and What Isn't

What's Working

Electric Arc Furnace Expansion: EAF technology currently represents 42.9% of global steel market share and is expanding rapidly. EAF production using renewable electricity and scrap feedstock achieves 75-85% emissions reductions versus integrated BF-BOF routes. The technology is mature, economically competitive in regions with low electricity costs, and benefits from growing scrap availability as steel in use accumulates globally.

Hydrogen-DRI Demonstration Projects: Multiple commercial-scale H2-DRI facilities are under construction or operational. SSAB's HYBRIT project in Sweden has delivered fossil-free steel to commercial customers since 2021. H2 Green Steel raised $4.54 billion in funding for its Swedish facility targeting 5 million tonnes annual capacity by 2030. ArcelorMittal is constructing H2-DRI capacity in Spain, Canada, and Germany.

CCUS Integration in Cement: Heidelberg Materials' Brevik facility in Norway represents the first full-scale CCUS deployment in cement production, with operations commencing in August 2025. The project captures 400,000 tonnes of CO2 annually, demonstrating technical feasibility at commercial scale. This proof point enables financing and permitting for subsequent projects across the industry.

Novel Cement Chemistries: Startups including Sublime Systems, Fortera, and Brimstone are developing alternative cement production routes that fundamentally alter emissions profiles. Sublime Systems uses electrochemical processes operating at ambient temperature, eliminating kiln-related emissions. Brimstone produces cement from calcium silicate rock rather than limestone, generating no process emissions while producing magnesium oxide that permanently sequesters atmospheric CO2. Fortera converts captured CO2 into supplementary cementitious materials.

Mass Timber Building Codes: Updated building codes in the United States, Canada, Australia, and Europe now permit mass timber construction for buildings up to 18 stories. The International Building Code 2021 introduced three new construction types for tall mass timber, removing a major regulatory barrier to adoption.

What Isn't Working

Green Hydrogen Cost Competitiveness: Despite significant cost reductions, green hydrogen produced via electrolysis remains 2-3 times more expensive than grey hydrogen from steam methane reforming in most regions. H2-DRI economics depend heavily on renewable electricity costs, creating geographic constraints on competitive production locations.

CCUS Economics Without Carbon Pricing: Carbon capture adds 20-40% to cement production costs. In markets lacking robust carbon pricing or equivalent policy mechanisms, this premium challenges market adoption beyond voluntary early adopters. The technology is proven but business models require regulatory support for widespread deployment.

Scrap Availability for EAF Expansion: While EAF capacity is growing, high-quality steel scrap supply cannot meet projected demand. Steel remains in buildings and infrastructure for 50-100 years, limiting near-term scrap availability. This constraint necessitates H2-DRI for primary steel production even as EAF capacity expands.

Mass Timber Supply Chain Maturity: CLT production capacity remains concentrated in Europe and is only beginning to scale in North America and Asia. Transportation costs for heavy timber panels limit economic shipping distances, requiring regional production capacity to serve major construction markets.

Examples

1. H2 Green Steel: Scaling Green Steel Production

H2 Green Steel, founded in 2020 and headquartered in Stockholm, has emerged as the most aggressively funded green steel venture globally. The company raised $4.54 billion in debt and equity financing by 2024, including the largest green industrial financing in European history. The flagship Boden facility in northern Sweden will produce 5 million tonnes annually of near-zero emission steel by 2030, leveraging Sweden's abundant renewable hydropower for hydrogen electrolysis. The company has secured offtake agreements with automotive manufacturers including BMW, Mercedes-Benz, and Volkswagen, demonstrating that demand signals from end-use sectors can underwrite capital-intensive production investments. H2 Green Steel's integrated approach, combining hydrogen production, DRI, and EAF steelmaking under single ownership, represents a vertical integration strategy for capturing value across the production chain.

2. Heidelberg Materials Brevik CCUS Project

Heidelberg Materials' Brevik cement plant in Norway achieved a landmark milestone when it commenced carbon capture operations in August 2025. The project, developed in partnership with the Norwegian government's Longship initiative, captures 400,000 tonnes of CO2 annually from cement production, representing approximately 50% of plant emissions. Captured CO2 is transported by ship to permanent geological storage beneath the North Sea. The total project cost of approximately 2.8 billion euros (including shared transport and storage infrastructure) demonstrates the capital intensity of CCUS deployment. However, successful operation provides the commercial reference case necessary for subsequent projects. Heidelberg Materials is now developing CCUS projects at facilities in North America and Europe, leveraging Brevik learnings to reduce deployment costs and timelines.

3. Ascent MKE: Tallest Mass Timber Building in North America

Ascent MKE in Milwaukee, Wisconsin, completed in 2022, stands as the tallest mass timber building in North America at 25 stories and 284 feet. Developed by New Land Enterprises and designed by Korb + Associates Architects, the mixed-use tower combines a concrete podium with 19 stories of mass timber construction. The project sequesters approximately 1,100 metric tons of CO2 in its timber structure while avoiding an estimated 2,400 metric tons of embodied carbon compared to conventional concrete and steel construction. Construction timelines were accelerated by 25% compared to traditional methods due to prefabricated timber panel installation. The project demonstrated regulatory feasibility by working with Milwaukee officials to secure approvals under then-emerging tall timber provisions, establishing precedents for subsequent projects nationwide.

Action Checklist

• Conduct embodied carbon assessment of current material procurement, establishing baseline emissions intensity for cement, steel, and structural materials using Environmental Product Declaration (EPD) data
• Evaluate supplier readiness for low-carbon material supply by requesting decarbonization roadmaps from primary cement and steel vendors, identifying those with credible pathways to 50%+ emissions reductions by 2030
• Assess mass timber feasibility for upcoming construction projects, engaging structural engineers with CLT experience to evaluate substitution potential for concrete and steel framing systems
• Develop internal carbon pricing mechanisms that incorporate EU CBAM equivalent costs into procurement decisions, creating economic incentives for low-carbon material selection even in advance of regulatory requirements
• Establish strategic partnerships or offtake agreements with emerging low-carbon material producers to secure supply access and potentially preferential pricing as green premium-paying demand exceeds near-term supply capacity

FAQ

Q: What is the realistic green premium for low-carbon steel and cement, and how long will it persist? A: Current green premiums range from 20-40% for CCUS-enabled cement and 15-30% for green steel, depending on production pathway and verification rigor. These premiums reflect early-stage supply constraints rather than fundamental cost differentials. As production scales and technology matures, premiums are expected to compress toward 5-15% by 2030 for steel and 10-20% for cement. However, regulatory mechanisms like EU CBAM will impose equivalent carbon costs on conventional production, potentially eliminating or inverting the premium structure for exposed markets.

Q: Which regions are best positioned to capture green steel production value? A: Regions combining abundant renewable electricity, existing steelmaking expertise, and supportive policy frameworks hold competitive advantages. Northern Europe (Sweden, Finland, Norway) leads current deployment due to low-cost hydropower. The U.S. Gulf Coast offers potential given renewable build-out and existing steel industry presence. Australia and Chile present longer-term opportunities for green iron ore export leveraging solar and wind resources. Europe currently captures 39.6% of the green steel market, but geographic distribution will evolve as hydrogen transportation economics mature.

Q: How does the First Movers Coalition actually influence purchasing decisions? A: First Movers Coalition members commit to purchasing defined percentages of near-zero emission materials, with targets of 10% near-zero cement and 10% near-zero steel by 2030. These commitments create guaranteed demand pools that de-risk producer investments. For procurement professionals within member companies, coalition commitments establish internal mandates and budgets for green premium payment. The coalition also provides technical definitions for "near-zero" that standardize procurement specifications across members.

Q: Can mass timber realistically displace concrete and steel in large-scale construction? A: Mass timber is technically viable for buildings up to 18 stories under current building codes, with demonstration projects reaching 25 stories. Economic competitiveness depends on regional factors including labor costs, local timber supply, and construction timeline value. Mass timber achieves 25-50% faster erection than concrete, creating schedule value in constrained markets. However, supply chain maturity limits near-term adoption. Realistic penetration trajectories suggest mass timber capturing 5-10% of mid-rise construction by 2030, concentrated in markets with established CLT manufacturing capacity.

Sources

• International Energy Agency: Iron and Steel Technology Roadmap
• Global Cement and Concrete Association: Net Zero Roadmap
• First Movers Coalition: Commitment Overview
• Heidelberg Materials: Brevik CCS Project
• H2 Green Steel: Company Overview and Financing
• European Commission: Carbon Border Adjustment Mechanism
• Think Wood: Mass Timber Building Codes