Government Financing for H₂-DRI Commercialization: Comparative Risk-Sharing Cases and Implications for Korea
research 2026-01-26
Public Finance Report Steel Policy Guide

Government Financing for H₂-DRI Commercialization: Comparative Risk-Sharing Cases and Implications for Korea

About

This report identifies hydrogen-based ironmaking (H₂-DRI) as a national industrial transition agenda and presents concrete policy recommendations to clarify the government’s role in enabling its commercialization.

 

As Korea approaches the commercialization phase of H₂-DRI, establishing a clear fiscal and financial framework for implementation is necessary. Drawing on Germany and Sweden as examples, the report examines how major steel-producing countries have institutionalized fiscal intervention and public–private risk-sharing mechanisms during the conversion of commercial facilities. Through this comparative analysis, the report identifies structural limitations in Korea’s current policy and budget framework and proposes financing strategies that could enable a commercial-scale transition.

Key findings

  • Government support for the HyREX project remains largely confined to the R&D and demonstration stage. A concrete risk-sharing structure explicitly designed for the commercial transition phase has yet to be established.

  • The transition to H₂-DRI requires a long-term investment of approximately USD 33.8 billion (KRW 47.3 trillion). Although this requires substantial initial capital expenditures and significant technological and market uncertainties at the company level, emission reduction benefits and broader industrial and socioeconomic spillover effects accrue to the national economy. 

  • Major countries such as Germany and Sweden have already established differentiated risk-sharing frameworks for commercial-scale H₂-DRI deployment, combining large-scale subsidies, policy finance, and state guarantees. Some projects are expected to begin commercial production as early as 2026.

  • Ultimately, the pace and feasibility of commercial-scale H₂-DRI transition in Korea will depend on whether the government clearly articulates and operationalizes a fiscal and financial risk-sharing framework tailored to the commercial facility conversion stage. Korea has now reached a critical policy juncture at which the government must concretely assume this role.

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