The Green Premium
A growing list of commodities now sells in a “green” version at a higher price. Some of that premium buys a genuinely cleaner tonne. Some of it buys an accounting entry. Telling them apart is the whole game.
A commodity is supposed to be fungible: a tonne of steel is a tonne of steel, priced off one screen. The decarbonisation push is trying to break that, by carving out a premium grade defined not by what the metal is but by how much carbon was emitted making it. Buyers with their own net-zero targets, carmakers, drinks companies, construction firms, will pay more for a low-carbon tonne. That premium is real, and it is the lever meant to finance the cleanup of the heaviest-emitting industries. The trouble is that carbon is invisible once the product is made. You cannot look at a coil of steel or an ingot of aluminium and see how it was produced, so the green claim rests entirely on accounting, and accounting can be gamed.
Book-and-claim: where the greenness comes loose from the tonne
The single most important idea in this theme is book-and-claim, borrowed from the renewable-electricity market. A wind farm sells its power onto the same grid as a coal plant; the electrons mix and cannot be separated. So the green attribute is split off into a certificate (a renewable energy certificate) that can be sold to someone who never touched that specific electricity. The same logic is now being applied to physical commodities through mass-balance accounting: a producer makes a batch of steel, some of it low-carbon and most of it not, and is allowed to sell the green attributeof the clean fraction to a premium buyer while the actual clean metal goes to whoever happens to be next in line. The buyer’s “green steel” may be physically identical to ordinary steel. They have bought a verified claim, not a different material. Done rigorously with a tight standard, this can still channel money to real decarbonisation. Done loosely, it lets a mill sell the same environmental benefit several times over, or attach it to production that was barely cleaner than the baseline.
Green steel: real technology, abused label
Steel is the headline case, because it is roughly 7 to 9 percent of global carbon emissions and the hardest of the heavy industries to clean. The genuine article exists: hydrogen direct-reduced iron, where green hydrogen replaces the coking coal that normally strips oxygen from iron ore, fed into an electric-arc furnace. Sweden’s HYBRIT and SSAB, the startup Stegra (formerly H2 Green Steel), and Boston Metal’s molten-oxide electrolysis are building real plants on this principle. But most steel marketed as “green” or “low-carbon” is nothing so radical. It may simply be ordinary scrap-fed electric-arc steel, which is lower-carbon than blast-furnace steel but decades old and not new, or steel made with grid electricity that is still mostly fossil, or a mass-balance allocation with no specific clean tonnes behind it. The premium is real, a few tens of dollars a tonne, and standards like ResponsibleSteel are trying to define the term, while the EU’s carbon border adjustmentfrom 2026 puts a hard cost on the dirty tonne and so creates a real, regulatory reason to pay up. Until the definitions bind, “green steel” covers everything from a hydrogen breakthrough to a relabelling exercise.
Green aluminium, green hydrogen, and the “green coal” that is not
The pattern repeats down the periodic table. Aluminium, one of the most electricity-hungry metals to smelt, sells hydro-powered premium brands (Rio Tinto and Hydro market exactly this), and the metal exchanges have built low-carbon data and trading initiatives around it, but the same book-and-claim question applies: is this the clean metal, or its detached certificate? Green hydrogen(made by electrolysis from renewable power) versus the “grey” hydrogen made from natural gas is becoming the master example, since hydrogen is the feedstock that makes green steel and green ammonia possible in the first place; a whole colour code (grey, blue, green) has grown up to police the claim. And then there is the limit case. “Green coal” is essentially a contradiction.The industry spent two decades promoting “clean coal,” meaning carbon capture or high-efficiency low-emission plants, and it delivered almost no economic projects; thermal coal is the commodity no certificate can launder. Where a green premium has no plausible physical basis, the label is just marketing.
The regulators arrive
The first decade of green premiums was self-policed, and the claims got ahead of the substance. That is now changing. The EU’s Green Claims Directivemoves to ban vague environmental labels that cannot be substantiated; the UK advertising regulator has struck down a string of “carbon neutral” and “sustainable” ads; the US Federal Trade Commission has been updating its Green Guides; and in 2024 a Dutch court ruled that KLM’s green advertising misled consumers. The direction of travel is the same everywhere: a green premium is becoming something you have to prove, with a registry entry and a standard behind it, not something you can simply assert on the packaging.
So which premiums are real?
The test is not the word “green,” it is what sits behind it. A premium is durable when three things are true: the production is physically different (hydrogen instead of coking coal, renewable power instead of a fossil grid), the claim is pinned to a credible standard and registry so it cannot be sold twice, and there is a regulatory cost on the dirty alternative, like a carbon price or a border tariff, giving buyers a hard reason to pay rather than a soft one. Where all three hold, as they increasingly do for green steel and green aluminium into Europe, the premium is a real market in the making. Where the claim rests on a loose mass-balance entry and a marketing department, it is the oldest trick in the commodity book: selling the same tonne twice, once for the metal and once for its halo.