British Steel is seeking a £100m loan from the government in order to meet European Union emission rules.
The second-biggest producer of steel in the United Kingdom is in talks with the state to secure funding in the next few weeks.
British Steel, which employs 5, ooo people, is understood to be unable to pay for carbon credits, having already used last year's permits to pay for working capital requirements.
Business Secretary Greg Clarke is said to be aware of the request, and his department has reportedly hired KPMG to advise on the situation.
British Steel, which was bought by private equity firm Greybull from India's Tata Steel in 2016, faces a cash shortfall because of the EU's decision not to allocate United Kingdom companies free carbon permits under its emissions trading system.
The firm, which employs around 5000 people in the United Kingdom, is understood to be unable to pay for the current round of carbon credits, having already used last year's permits to pay for working capital requirements.
The Department for Business, Energy and Industry Strategy told the BBC: "As the business department, we are in regular conversation with a wide range of sectors and companies".