“Green” steel investments in the EU: Pie in the sky?

Per-Olov Johansson and Bengt Kriström

Resource and Energy Economics, 2025, vol. 82, issue C

Abstract: The steel industry accounts for approximately 7%–8% of global carbon dioxide emissions. To address this, several initiatives aim to establish carbon-neutral steel production by replacing coal with hydrogen derived from fossil-free electricity. These projects, however, depend on substantial state subsidies, raising questions about their economic viability, especially under comprehensive carbon policies, such as those outlined in the EU’s Fit-for-55 package. Our analysis employs a cost–benefit framework grounded in general equilibrium theory, which explicitly considers the direct and indirect effects of policies on primary and secondary markets, as well as broader economic interdependencies. By integrating the EU Emissions Trading System (ETS) and Carbon Border Adjustment Mechanisms (CBAMs) into this framework, we provide a rigorous evaluation of the social desirability of hydrogen-based steel production. Our findings, based on a case study of a large-scale plant in northern Sweden, indicate significant social losses, with potentially far-reaching implications for similar projects across the EU. We might see a da capo of the 1970s European steel crisis.

Keywords: Cost–benefit analysis; Green steel; Hydrogen; Renewable electricity (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:82:y:2025:i:c:s0928765525000181

DOI: 10.1016/j.reseneeco.2025.101494

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