Indeed, electrolytic smelting is around and is currently used to produce high purity iron.
There are a few engineering difficulties arising from the high temperatures required and the chemicals around.
And note that aluminum smelting also releases quite a lot of carbon dioxide for various reasons, one of them being consumption of the graphite electrodes.
Hydrogen production via electrolysis has the property that it can be turned on and off nearly instantly. Aluminum electrolysis in molten cryolite must be kept running to maintain the temperature gradient between the molten electrolyte and the walls (if not maintained, either the walls overheat or the electrolyte freezes, ruining the cell.) The temperature for iron electrolysis in molten materials would be even higher.
One can imagine electrolyzing iron in aqueous solutions, but I understand this actually needs more energy than producing hydrogen and using that to reduce iron oxide. There is some electrolytic iron produced today, for applications that require very high purity (as high as 99.999%).
There are a few engineering difficulties arising from the high temperatures required and the chemicals around.
And note that aluminum smelting also releases quite a lot of carbon dioxide for various reasons, one of them being consumption of the graphite electrodes.
1. https://en.wikipedia.org/wiki/Electrolytic_iron
2. https://www.newscientist.com/article/dn9878-electrolysis-may... (2006)
3. https://link.springer.com/article/10.1007/s10800-017-1143-5 (2018)