(Bloomberg) -- Erdemir Group, which includes Turkey’s two top steelmakers, announced a $3.2 billion plan to invest in greener production and curb carbon emissions.

That involves building two electric arc furnaces at Eregli and Iskenderun, fed by scrap-gathering centers in Turkey and abroad, according to Serdar Basoglu, chief financial officer of the metallurgy and metals division at Oyak Group, a military pension fund manager that owns Eregli Demir ve Celik Fabrikalari AS and Iskenderun Demir ve Celik AS.

European steelmakers are looking to a combination of electric-arc furnaces and hydrogen to transform an industry that still burns billions of tons of coal, generating about 7% of the world’s carbon dioxide emissions. EAFs melt down scrap steel and other materials in a process that leads to less pollution than coal-fired blast furnaces.

Erdemir will also construct 1,000 megawatts of solar capacity, invest in carbon capture technologies and build a $550 million pelletizing plant, first announced in 2022. Both carmakers and steelmakers are sealing deals for green steel, and using them to tout their environmental credentials.

“Such moves to turn green and have net zero carbon emission targets help companies to boost their competitive edge in global markets,” Oyak Chief Executive Officer Suleyman Savas Erdem said in written comments, after Basoglu held a news conference in Istanbul to announce the plan.

Erdemir will use will use syndicated loans and debt sales in international markets to finance up to 80% of the transformation, the CFO said.

The EAF for Iskenderun will have an annual capacity of 2.5 million tons, with Eregli able to produce as much as 1.4 million tons a year. That will raise the group’s raw steel production capacity to 13.5 million tons a year from 9.5 million tons, Basoglu said.

Oyak said the investments will cut carbon emissions by 25% by 2030, as the steelmaker targets net zero by 2050. The two new plants will start using natural gas, but later plan to harness hydrogen-based technologies.

Eregli fell as much as 2.5% in Istanbul, while Iskenderun declined 1.4%.

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