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Macroeconomic implications of a 2°C-compatible transition path in the European iron and steel industry

Author

Listed:
  • Jakob Mayer
  • Gabriel Bachner
  • Karl W. Steininger

Abstract

The primary objective is to evaluate macroeconomic implications of a switch from conventional to hydrogen based steel production in the European Union. Nine out of ten tonnes of steel produced globally are derived from GHG process emission intensive blast furnaces. Currently, there are signs that European key-players in the iron and steel industry intend to go for an alternative technological route which is hydrogen based direct reduced iron. This alternative would allow to cut down process emissions to zero and, as such, would make the 21st century steel-making GHG emission-free. We deploy a dynamic recursive multi-region multi-sector computable general equilibrium model and implement a transition pathway for the European iron and steel sector up to 2050. In our working paper we show that higher unit costs for the alternative iron- and steel-making technology leads to lower gross domestic product and welfare levels in the EU compared to a reference path (which is calibrated to the shared socio-economic pathway 2). We intend, in particular, to compare these costs of action with the costs of inaction. The latter will be derived by evaluating the abated GHG process emission levels with the Social Costs of Carbon assessed by the Interagency Working Group.

Suggested Citation

  • Jakob Mayer & Gabriel Bachner & Karl W. Steininger, 2017. "Macroeconomic implications of a 2°C-compatible transition path in the European iron and steel industry," EcoMod2017 10468, EcoMod.
  • Handle: RePEc:ekd:010027:10468
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    References listed on IDEAS

    as
    1. Cai, Yiyong & Arora, Vipin, 2015. "Disaggregating electricity generation technologies in CGE models: A revised technology bundle approach with an application to the U.S. Clean Power Plan," Applied Energy, Elsevier, vol. 154(C), pages 543-555.
    2. Elmar Kriegler & Jae Edmonds & Stéphane Hallegatte & Kristie Ebi & Tom Kram & Keywan Riahi & Harald Winkler & Detlef Vuuren, 2014. "A new scenario framework for climate change research: the concept of shared climate policy assumptions," Climatic Change, Springer, vol. 122(3), pages 401-414, February.
    3. Detlef Vuuren & Elmar Kriegler & Brian O’Neill & Kristie Ebi & Keywan Riahi & Timothy Carter & Jae Edmonds & Stephane Hallegatte & Tom Kram & Ritu Mathur & Harald Winkler, 2014. "A new scenario framework for Climate Change Research: scenario matrix architecture," Climatic Change, Springer, vol. 122(3), pages 373-386, February.
    4. Brian O’Neill & Elmar Kriegler & Keywan Riahi & Kristie Ebi & Stephane Hallegatte & Timothy Carter & Ritu Mathur & Detlef Vuuren, 2014. "A new scenario framework for climate change research: the concept of shared socioeconomic pathways," Climatic Change, Springer, vol. 122(3), pages 387-400, February.
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