In an indistinct office park in the suburban outskirts of Boston, a ten-year-old startup is trying to reinvent a process at the core of the $1.6 trillion steel industry to reduce carbon emissions and fight climate change.

Boston Metal was spun out of research developed at the Massachusetts Institute of Technology in 2013 and has since raised a total of $250 million. The 120-person company is working on a green way to make steel, which is both the backbone of modern infrastructure construction and a significant contributor to climate change, generating between 7% and 9% of global carbon dioxide emissions, according to the World Steel Association.

Boston Metal has not started generating revenue and is still iterating on the final technology that it will use to make clean steel at scale.

But recently, it signed a $20 million funding deal with the private-sector investment arm of the World Bank, the International Finance Corporation.

It’s the first time the IFC has ever invested in a pre-revenue startup, which speaks to the value the World Bank sees in helping low-income nations make steel without carbon emissions, IFC Director William Sonneborn told CNBC.

“I am just here in Africa,” Sonneborn said in a video call from Senegal at the end of May. “There are hundreds of millions of people that don’t have a house. At some point, they’re going to need steel. And so the incremental steel production of the world is not going to be in the U.S. — the technology may have been invented at MIT, but the incremental steel production is not going to be in the U.S.”

The majority of crude steel, 59%, was manufactured in developing countries in 2021, according to the IFC. Boston Metal’s process will be particularly attractive in developing nations that also have access to clean electricity, such as Chile, Ethiopia, Malawi, Uruguay, and Zambia, the IFC says.

CNBC visited Boston Metal’s headquarters in Woburn, Mass., at the end of May to learn more about the startup that’s raised hundreds of millions of dollars from investors like ArcelorMittal (the second-largest steel producer in the world), Microsoft‘s Climate Fund, and Bill Gates’ Breakthrough Energy Ventures in addition to the World Bank.

The conventional steel-making process puts iron ore or iron oxide in a coal-powered blast furnace, which generates significant carbon dioxide emissions. In a conventional steel mill, two tons of carbon dioxide are generated for every ton of steel that is made, explained Boston Metal executive Adam Rauwerdink during a tour of the lab.

Instead, Boston Metal uses an electro-chemical process called molten oxide electrolysis.

The technique passes electricity through iron oxide mixed with a slew of other oxides, which are chemical compounds that contain at least one oxygen atom. If the electricity that goes into the process is clean, then the steel that comes out the other side of the electrolysis cell is clean, too.

The process resembles a battery, with a positively charged anode and negatively charged cathode directing the flow of electricity through the process.

For Boston Metal’s electrolysis to work, it has to convert the alternating current from the grid to direct current.

The anode in Boston Metal’s process was a key development from MIT. It’s primarily made of chrome and iron with some other small quantities of other materials mixed in, and does not get consumed or corroded during the electrolysis process.

“What’s special about it is it can survive at high temperature — 1,600 Celsius, 3,000 Fahrenheit. And as you’re doing electrolysis, you’re using electrons to split apart iron and oxygen. So that anode is getting hit by oxygen all day long at super high temperature, and it has to survive in that environment,” explained Rauwerdink during a tour of the lab. “There’s very few elements that will do that. That alloy is one that will.”

The byproduct of the process is oxygen.

While Boston Metal is still iterating on the commercial-scale technology, the science behind the process is assured.

“It’s no longer a binary thing that you will fail or you will succeed,” Boston Metal CEO Tadeu Carneiro told CNBC in Woburn. “It’s a question of how long will be the life of the anode? Is it going to last three years or two years? That’s where we are now, we are finalizing all the parameters in order to build the biggest, the largest industrial cell. So that’s where we are.”

The steel industry is watching.

“The first thing I did when I joined the company was to visit my friends, all the CEOs of the different steelmaking companies, especially in Asia, to present them the idea. That’s six years ago,” Carniero said. “It’s funny, for most of them, it seemed to be too early. Now, they are all desperate — because they have to find a solution. And they don’t have a solution.”

Boston Metal’s process can use low-grade iron ore, which is one of the reasons that the IFC invested in the company.

“There are many emerging markets that have lots of iron ore, it’s just low quality and so therefore they can’t have steel production with blast furnace technology. They can use the Boston Metal technology,” Sonneborn told CNBC.

That means that these developing markets can make their own steel, creating self-sufficiency for these countries’ economies, Sonneborn said.

Also, the electrolysis cells can get bigger to a certain point, but after that the company will have to place many cells next to each other to make green steel.

“If you go to a full-scale plant using this technology, you might see a couple hundred electrolysis cells.” Rauwerdink told CNBC.

That cell modularity is attractive to the World Bank.

“The modular technology of Boston Metal allows a small country like Burkina Faso to build their own steel plant, to have their own steel production — as opposed to importing it from India and paying hard currency outside of the country when it could actually do it internally,” Sonneborn told CNBC.

Boston Metal is in the midst of raising what it hopes will be a $300 million funding raise. So far, it has closed half of that round and has “much of the remainder spoken for,” Rauwerdink told CNBC.

The main goal of Boston Metal is green steel, but the company will also use its core electrolysis technology to produce tin, niobium, and tantalum metals from what is otherwise considered waste from the mining process. About one third of the $300 million will go towards getting this program commercialized in its Brazil subsidiary, and the largest device the company has built so far will be used there.

Niobium is primarily used in making steel, tin us used both as a metal and in electronics, and tantalum is used, among other purposes, in the electronics industry for capacitors and other components.

“It’s easier, that’s why we can deploy earlier,” Carneiro told CNBC in Woburn. “The characteristics of the anodes are different.”

The metal-generation business in Brazil will be the first to generate revenue for the company.

The other two thirds of the $300 million raise will go towards finalizing the development of the steel making process and its components. Boston Metal plans to be at commercial scale for making green steel in 2026.

When Boston Metal is ready to commercialize its green steel operation, these kinds of cells will run for years at a time. Boston Metal will make money both by licensing the technology and by making and selling the anodes needed for the green steel process.

Boston Metal hopes to start licensing the technology in 2026, Carniero told CNBC.

IFC wants Boston Metal to be successful so that it can help developing nations build their own steel manufacturing, but also so it can generate returns for other projects. IFC does not pay out dividends from its investments to investors — all gains go right back into the coffer.

“When we exit, all of those gains are going to go back to solving gender inequality in India or South Asia or climate challenges in different aspects. So every profit that we make, again doesn’t get distributed as a dividend to our shareholders, it gets reinvested back into our development goals,” Sonneborn told CNBC.