The $1.6 trillion steel industry is the backbone of the modern world. It’s also a significant contributor to global warming, representing between 7% and 9% of global carbon dioxide emissions, according to the World Steel Association.

That’s why massive global businesses, including international steel giant ArcelorMittal and tech stalwart Microsoft, are investing in Boston Metal, a company that spun out of Massachusetts Institute of Technology and developed a new way of making clean steel.

“There is no economy, there is no infrastructure without steel,” Boston Metal CEO Tadeu Carneiro told CNBC in a video call on Wednesday. So when it comes to decarbonizing industry to fight climate change, “it’s a big piece of the puzzle. I don’t think this is obvious to everybody,” Carneiro said.

In 2013, MIT professors Donald Sadoway and Antoine Allanore published a paper in the journal Nature with lab results proving that it is possible to generate steel without releasing carbon dioxide emissions. The same year they launched a company, Boston Electrometallurgical Corp., to scale and commercialize that technology.

In 2017, Carneiro joined the company as a CEO. He is a veteran of 40 years career in the steel industry, mostly at Brazilian metals giant CBMM. In 2018, Boston Metal raised its first round of funding, $20 million, in a round led by Breakthrough Energy Ventures, the climate investing firm founded by Microsoft co-founder Bill Gates.

Gates has for years emphasized the need to think about decarbonizing the manufacturing sector. Transportation gets a whole lot of attention but is responsible for only 16% of global emissions, where manufacturing generates 31%, according to Gates’ book, “How to Avoid a Climate Disaster.”

“Whenever I hear an idea for what we can do to keep global warming in check — whether it’s over a conference table or a cheeseburger — I always ask this question: ‘What’s your plan for steel?'” Gates wrote on his own blog in 2019.

On Friday, Boston Metal announced it has raised $120 million Series C round, led by multinational steel giant ArcelorMittal, with funding from Microsoft’s Climate Innovation Fund as well.

With the funding, Boston Metal will ramp up production of green steel at its pilot facility on Woburn, Massachusetts, and support the construction of its Brazilian subsidiary, Boston Metal do Brasil, where the company will manufacture various metals. It plans to begin construction of a demonstration steel plant in 2024 and a commercial sized plant in 2026, Carneiro told CNBC.

For ArcelorMittal, making steel without greenhouse gas emissions is not only a responsibility, but also a business necessity according to Irina Gorbounova, a vice president and the Head of XCarb Innovation Fund at ArcelorMittal.

“Our customers are asking for it, our investors expect us to transition and our employees — and our future workforce — want to work for a company that is part of the solution and not part of the world’s climate problem,” Gorbounova told CNBC.

“Increasingly, we are also seeing a cost of carbon,” Gorbounova told CNBC. In Europe, the Emissions Trading System, or ETS, already puts a price on carbon emissions, Gorbounova told CNBC.

“The EU has been at the forefront of climate policy, but it’s reasonable to expect other regions to follow. So, there is a business case for us to decarbonize as well,” Gorbounova told CNBC. “Zero or near-zero carbon emissions steel will become a reality. The only question is how quickly we can make that journey happen. If steel companies don’t decarbonize, they will not stand the test of time.”

Ironically, steel is a primary component ingredient in many of the technologies being constructed to decarbonize, such as wind toward and electric vehicles, Gorbounova said.

Microsoft does not build cars or make steel, but it is trying to meet its own aggressive climate goals, which include being carbon negative by 2030 and removing all of the company’s historic carbon emissions since the company was founded in 1975.

That said, heating this soup to the required 1,600 degrees Celsius requires significant electrical energy — making one million tons of steel per year will require 500 megawatts of baseload clean electricity, or about half the electricity necessary to power a midsize city. “The availability of electricity will dictate how fast the process will be implemented,” Carneiro said.

The electricity has to be clean as well, or it defeats the entire purpose.

“We believe in the future, we will have abundant and reliable and green and cheap electricity in order to use this process and manufacture green steel,” Carniero said.

There are other processes being developed to make clean steel with hydrogen, but they require very pure iron oxide, and only about 4% of the iron ore that is commercialized is suitable, Carniero said.

Boston Metal will eventually license its technology to steel companies, not be a steel manufacturer itself.

“Every steelmaking company is in contact with us to understand our progress and when we will become commercial,” Carneiro told CNBC. “They all making pledges to be carbon-neutral by 2050. And they don’t really have a solution right now. So, they really need a solution for large scale, and our technology is the only one that can scale up to this billions of tons of capacity.”