Kriström, Bengt
- Department of Forest Economics, Swedish University of Agricultural Sciences
- Centre for Environmental and Resource Economics (CERE)
- Umeå University
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
Published in
Resource and Energy Economics
2025, volume: 82, article number: 101494
Publisher: ELSEVIER
SLU Authors
UKÄ Subject classification
Environmental Economics and Management
Publication identifier
- DOI: https://doi.org/10.1016/j.reseneeco.2025.101494
Permanent link to this page (URI)
https://res.slu.se/id/publ/141779