Hard-to-abate sectors emitted ~30% of global CO₂ emissions in 2018. As the world’s largest producer of chemicals and steel, China’s mitigation efforts in these sectors are crucial. Here we examine the greenhouse gas mitigation and costs of co-producing steel and chemicals in China by extracting H₂ and CO from steelmaking off-gas for chemical production and using a customized optimization model with a life-cycle assessment. Without carbon pricing, co-production reduces greenhouse gas emissions by 36 MtCO₂eq yr⁻¹ (−7%) and costs by 1.5 billion CNY per year (−1%) relative to independent production. A carbon price of 350 CNY per tCO₂ enhances emissions and cost reductions to 113 MtCO₂eq yr⁻¹ (−22%) and 25.5 billion CNY per year (−10%), respectively. Furthermore, 60% of total emissions and cost reductions can be achieved via 24% of connections, ~50% of which are in Hebei, Henan, Shanxi and Shandong provinces. This study demonstrates the cost-effectiveness of using co-production to mitigate these hard-to-abate emissions and the importance of targeting critical connections to obtain the majority of reductions.