Clean steel manufacturer Boston Metal recently announced that it raised $120 million in Series C funding, with the round led by ArcelorMittal's (MT  ) XCarb Innovation Fund and Microsoft's (MSFT  ) Climate Innovation Fund.

According to the World Steel Association, the steel industry is worth $1.6 trillion and accounts for between 7% and 9% of global carbon emissions.

Steel is an essential part of the global economy, and Boston Metal, a spin-off from Massachusetts Institute of Technology (MIT), is leading the way on developing climate-friendly ways to make this important commodity.

"There is no economy, there is no infrastructure without steel," Boston Metal CEO Tadeu Carneiro told reporters at CNBC. Carneiro said this makes decarbonizing steel "a big piece of the puzzle" in the fight against climate change. "I don't think this is obvious to everybody," he added.

While the auto industry is frequently the target of climate change initiatives, it makes up a much smaller portion of emissions, 16%, compared to manufacturing's 31%, according to longtime decarbonization advocate Bill Gates.

"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 in 2019.

Boston Metal says it will use the Series C funding both to increase the production of green steel in its Woburn, MA pilot facility, and to ramp up construction on its Brazilian subsidiary, Boston Metal do Brasil. Carneiro told reporters that the company plans to start construction on a demonstration-sized facility in 2024 with construction on a commercial facility set to start in 2026.

"In Boston Metal, we are investing in a team that has made impressive progress over a relatively short period of time, developing a technology that has exciting potential to revolutionize steelmaking," ArcelorMittal's CEO Aditya Mittal is quotes in the announcement. "In our extensive discussions with them, we have been impressed by the passion and vision they have to contribute to the decarbonization of steelmaking. They are an exciting and welcome addition to the XCarb® Innovation Fund's portfolio."

Scrap recycling, which accounts for 30% of steel production worldwide has a relatively small carbon footprint, but the emissions generated by traditional processes for manufacturing steel are much higher. Coal and iron are combined at incredibly high temperatures to create regular steel, generating high amounts of CO2.

In contrast, Boston Metals uses electricity to heat up a combination of iron and "a soup of other oxides." According to Carneiro, "There's no carbon involved."

"The technology Boston Metal is developing has the potential to deliver affordable green steel at scale, helping to drive cross-industry decarbonization, which is increasingly critical for companies with carbon reduction targets, such as Microsoft," said Brandon Middaugh, the Director of Microsoft Climate Innovation Fund.

Still, producing any significant amounts of Boston Metal's green steel takes a lot of energy, and that energy also has come from green sources or else it defeats the purpose of the process.

"The availability of electricity will dictate how fast the process will be implemented," Carneiro said. "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."

Boston Metal's ultimate goal is not to be a large scale manufacturer of green steel itself, but rather to license its technology out to other steel companies.

"Every steelmaking company is in contact with us to understand our progress and when we will become commercial," Carneiro is quoted by 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."