The steelmaker said in a statement it was "unfortunately unable to pursue... plans to decarbonise its flat steel mills in Bremen and Eisenhuettenstadt".
The transformation plan was estimated to cost a total of 2.5 billion euros ($2.9 billion), including a 1.3 billion euro subsidy from the German government.
Under the subsidy agreement, construction would have had to begin this month.
Instead, ArcelorMittal officially notified the government it could not continue, citing difficult "market conditions and the lack of economic viability of CO2-reduced steel production".
"Even with this financial support, the economic viability of this transition is not sufficiently ensured," ArcelorMittal's Europe chief Geert Van Poelvoorde said in a statement.
"The European steel industry is currently under unprecedented pressure to maintain its competitiveness -- even without the additional costs required for decarbonisation," Van Poelvoorde said.
Low-carbon hydrogen for steel manufacturing "is not yet a viable energy source", the group said, while natural gas-based alternatives were "not competitive as a transitional solution".
The company said it would "focus on planning the construction of electric arc furnaces... to be prepared when production becomes economically viable".
It also called on lawmakers in Brussels and among member states, including Germany, to do more to support low-carbon steel production.
Among the issues to be addressed are current high import volumes of steel into Europe, where demand was already too "weak", the group said.
The implementation of a carbon border adjustment tax and more stable prices for electricity were also needed, it said.
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