A pioneering study emerging from the Stockholm School of Economics sheds new light on the economic dynamics surrounding Romania’s ambitious endeavor to produce environmentally sustainable steel. Set against the backdrop of a decarbonizing Europe, this research scrutinizes the financial robustness of transitioning Liberty Steel Galați, one of the continent’s most carbon-intensive steel plants, toward a low-carbon production model powered by green hydrogen and electric arc furnace technology. The findings, which underscore the critical influence of hydrogen sourcing on competitiveness, foreshadow potentially transformative shifts in both industrial operations and energy policy within Central and Eastern Europe.
The steel industry remains a colossal contributor to global carbon emissions, responsible for approximately seven percent of worldwide CO₂ output. As the European Union intensifies its commitment to climate neutrality by 2050, the pressure mounts on heavy industry to adopt greener pathways. Liberty Steel Galați, positioned within Romania’s industrial heartland, confronts this imperative directly, aspiring for carbon neutrality by 2030. This transition is not merely an environmental obligation but a testbed for the economic viability of green steel amid volatile energy markets and infrastructural constraints.
Central to the study’s inquiry is the sourcing of hydrogen—a cornerstone in green steel’s decarbonization strategy. Hydrogen produced on-site, leveraging presumably stable electricity from renewable sources, offers a scenario where green steel could be competitively priced, even undercutting traditional blast furnace methods by about EUR10 per ton. However, the prospect of procuring hydrogen externally introduces a steep price premium of roughly 15 percent, ballooning the cost and threatening to erode the plant’s profitability with potential net value losses reaching €3.3 billion over two decades.
Such a stark contrast in cost implications pivots on the electricity dynamics integral to hydrogen production. On-site hydrogen generation envisages a dramatic tripling of the plant’s electricity demand—from 3.4 terawatt-hours annually to an estimated 10.9 terawatt-hours. This surge corresponds to nearly 30 percent of Romania’s entire non-household electricity consumption, signaling substantial pressure on the national grid and a risk of inflated electricity prices that could negate cost advantages. Crucially, the environmental credentials of green steel hinge on sourcing this electricity from fossil-free resources, yet today fossil fuels compose about 30 percent of Romania’s electricity mix, posing a significant sustainability challenge.
The researchers employed sophisticated data analytics, curated by the Bucharest-based Energy Policy Group, to chart the nuanced price swings tied to hydrogen sourcing. The study’s methodological rigour underscores the multifaceted nature of transitioning legacy industrial production while balancing economic incentives. Notably, a EUR100 per ton premium price swing pinpoints hydrogen sourcing as a critical financial lever, dictating whether green steel can compete or succumb within current market structures.
Importantly, the implications of these findings extend beyond Liberty Steel Galați’s plant boundaries. In mapping the economics of green steel production within Romania—a nation emblematic of Eastern Europe’s evolving industrial landscape—the study offers a scalable archetype for broader regional decarbonization efforts. Central and Eastern Europe, often underrepresented in global climate transition dialogues, stands to reap insights on managing energy demand, infrastructure readiness, and policy formulation critical to meeting sustainability goals.
The study does not shy away from acknowledging the uncertainties inherent in projecting future electricity prices and hydrogen infrastructure developments. These variables introduce a layer of complexity that both industry leaders and policymakers must grapple with as they design strategic frameworks supporting low-carbon steelmaking. The potential role of policy instruments such as carbon contracts for difference (CCfDs) is highlighted, suggesting avenues for mitigating financial risks and stabilizing market conditions to attract investment into green technologies.
Co-author Rickard Sandberg, professor and head of the Center for Data Analytics at the Stockholm School of Economics, emphasizes the dual audience targeted by the research. On the industrial front, the work delivers actionable insights for risk assessment and strategic planning, guiding producers through the labyrinth of decarbonization challenges. For policymakers, these findings stress the urgency in establishing stable electricity prices, bolstering green energy investments, and nurturing infrastructural ecosystems that enable cost-effective hydrogen production.
The broader strategic significance of transitioning Europe’s steel production to a low-carbon paradigm cannot be overstated. Steel underpins critical sectors such as construction, automotive, and machinery manufacturing, all of which face mounting demands to align with global sustainability benchmarks. Innovations in hydrogen-based steelmaking represent a frontier technology with the potential to reshape supply chains and production costs, contingent on surmounting energy supply challenges and market acceptance hurdles.
Addressing the intricate balance of energy demand and sustainability objectives, the study surfaces a paradox: aggressive on-site hydrogen production can achieve lower unit costs but risks destabilizing electricity markets if renewable generation capacity and grid infrastructure do not keep pace. Conversely, external hydrogen procurement, while offloading some grid pressures, imposes a price burden that may render green steel economically unviable. Navigating this trade-off emerges as one of the defining challenges of the green industrial transition.
This financial analysis, backed by the Jan Wallander and Tom Hedelius Foundation, marks a significant contribution to the academic discourse surrounding the green transformation of heavy industry. Its granular exploration of Romania’s steel sector offers both a warning and a roadmap—a caution against simplistic solutions and an encouragement toward integrated approaches that couple technological innovation with supportive policy frameworks.
As the European steel sector embarks on this unprecedented shift, the study underscores that the path to decarbonization is as much about economic calculus and energy system design as it is about technological capability. For national economies like Romania’s, where industrial activities constitute a substantial economic pillar, mastering this complex interplay will determine not only environmental outcomes but also industrial competitiveness and socio-economic resilience in the decades ahead.
In sum, the Stockholm School of Economics’ research illustrates a decisive moment in the global fight against climate change. By revealing the intricate factors underpinning the competitiveness of green steel production, it equips stakeholders with crucial knowledge to drive pragmatic, financially viable decarbonization strategies. This study’s insights resonate far beyond Romania, charting a course for green industrial revolutions worldwide.
Subject of Research:
Not applicable
Article Title:
Pricing the Green Transition: An Investment Appraisal of Romanian Low-Carbon Steel
News Publication Date:
17 June 2025
Web References:
http://dx.doi.org/10.1111/jiec.70054
Image Credits:
Juliana Wiklund
Keywords:
Industrial science; Steel; Metals; Economics research; Hydrogen fuel; Fossil fuels; Green energy; Industrial sectors; Manufacturing; Corporations
