Macroeconomic and environmental impacts of two decarbonization options for the Dutch steel industry: green relocation versus green hydrogen imports

Clara Caiafa, Kurt Kratena and Iñaki Arto

Energy Policy, 2025, vol. 206, issue C

Abstract: Decarbonizing the steel industry will require a shift towards renewable energy. However, costs and emissions associated with the long-distance transport of renewable energy carriers may incentivize the relocation of steel production closer to renewable energy sources. This “green relocation” would affect regional economic structures and global trade patterns. Nevertheless, the macroeconomic and environmental impacts of alternative industry location options remain underexplored. This study compares the impacts on value-added, prices, and emissions under two options for decarbonizing the Dutch steel industry: importing green hydrogen from Brazil to produce green steel in the Netherlands versus relocating production to Brazil and transporting green steel to the Netherlands. Impacts are analyzed by combining a price and a quantity model within an environmentally extended multiregional input-output (EE-MRIO) framework. Results suggest that the relocation option brings the greatest synergies between climate and economic goals at the global level, as it leads to lower production costs, smaller price effects, and greater emissions reductions. However, relocation also results in stronger distributive impacts across global regions. Higher carbon prices would be insufficient to counteract relocation incentives. This calls for policymakers in industrialized countries to systematically consider the possibility of green relocation when designing decarbonization and industrial competitiveness strategies.

Keywords: Industry decarbonization; Green hydrogen; Green steel; Input-output modeling; Economic impacts; International trade (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525002332

DOI: 10.1016/j.enpol.2025.114726

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