Currently, fossil fuels are still the primary fuel source and reducing agent in the steel industries. The utilization of fossil fuels is strongly associated with CO2 emissions. Therefore, an alternative solution for green steel production is highly recommended, with the use of biomass as a source of fuel and a reducing agent. Biomass’s growth consumes carbon dioxide from the atmosphere, which may be stored for variable amounts of time (carbon dioxide removal, or CDR). The pellets used in this study were prepared from a mixture of low-grade iron ore and palm kernel shells (PKS). The reducing reactivity of the pellets was investigated by combining thermogravimetric analysis (TGA) and laboratory experiments. In the TGA, the heating changes stably from room temperature to 950 °C with 5–15 °C/min heating rate. The laboratory experiments’ temperature and heating rate variations were 600–900 °C and 10–20 °C/min, respectively. Additionally, the reduction mechanism was observed based on the X-ray diffraction analysis of the pellets and the composition of the reduced gas. The study results show that increasing the heating rate will enhance the reduction reactivity comprehensively and shorten the reduction time. The phase change of Fe2O3 → Fe3O4 → FeO → Fe increases sharply starting at 800 °C. The XRD intensities of Fe compounds at a heating rate of 20 °C/min are higher than at 10 °C/min. Analysis of the reduced gas exhibits that carbon gasification begins to enlarge at a temperature of 800 °C, thereby increasing the rate of iron ore reduction. The combination of several analyses carried out shows that the reduction reaction of the mixture iron ore-PKS pellets runs optimally at a heating rate of 20 °C/min. In this heating rate, the reduced gas contains much higher CO than at the heating rate of 10 °C/min at temperatures above 800 °C, which encourages a more significant reduction rate. In addition, the same reduction degree can be achieved in a shorter time and at a lower temperature for a heating rate of 20 °C/min compared to 10 °C/min.