Industrial policy crucial for the continued development of green steel

Source: https://www.lunduniversity.lu.se/article/industrial-policy-crucial-continued-development-green-steel Parent: https://www.lunduniversity.lu.se/home

By jonas [dot] andersson [at] kommunikation [dot] lu [dot] se (Jonas Andersson) - published 6 March 2026

Photo: Anders Frick/Wikimedia Commons CC BY-SA 4.0

Sweden's investments in climate-friendly green steel are a potential driving force for both European competitiveness and energy independence. However, without a sustainable, strategic industrial policy, there is a risk that the technology will instead be commercially exploited in China, according to a new thesis from Lund University in Sweden.

For better or worse, industrial policy plays a decisive role in the global transition of heavy industry towards more sustainable production. The question is whether Sweden and the EU will dare to maintain their current green course as competition from China intensifies.

“Green industrial development is central to competitiveness and European energy policy. The steel industry plays a central role in this, with new technology, long value chains and its strategic importance to many other sectors,” says Jonas Algers, doctoral student in Environmental and Energy Systems Studies at Lund University, who recently published his thesis “Steel decarbonisation in the early 21st century”.

The global steel industry accounts for almost ten per cent of the world's greenhouse gas emissions. Reducing emissions from the steel industry will affect energy use, supply chains and countries' competitiveness – and may have geopolitical consequences. That is why governments around the world are using industrial policy to accelerate the transition and strengthen their own industries.

The study shows that industrial policy has played a decisive role in enabling the development of fossil-free steel. Clear climate targets, coordination between state-owned companies along the value chain, targeted research efforts and targeted support have made Sweden a world leader in the technology.

Furthermore, comparisons with Germany and the United States show that Sweden's model has been relatively cost-effective. Since 2018, state support through the state funding programme the Industrial Leap has amounted to approximately SEK 7.4 billion. During the same period, Swedish industry imported coal and similar products worth more than SEK 40 billion. Electrification would mean that a large proportion of such sums could remain in Sweden.

According to the study, green steel policy contributes on three levels: through direct reductions in emissions, through exports of green products, and through technological developments that other countries can emulate.

“Hitting climate targets will be difficult, but not impossible. To do so will, however, require policies that are sustainable and clear-sighted about market conditions such as trade conflicts, global overcapacity and fierce international competition,” says Jonas Algers.

However, such developments are not a foregone conclusion. The Government has reduced funding for the Industrial Leap and has been cautious about providing further support to the steel company Stegra, despite receiving approval from the European Commission. At the same time, China has stepped up its efforts. The state-owned company China Baowu Steel Group has launched extensive initiatives in the green steel sector and has already exported hydrogen-based steel to the EU.

“There is a risk that Europe will repeat the mistake made in the battery and solar cell industry: where technology is developed here but scaled up in Asia. For a country like Sweden, with a long tradition of iron and steel production, this would mean lost export opportunities and increased dependence on Chinese suppliers,” says Jonas Algers.

Publication:

Link to the thesis:\ \ Steel decarbonisation in the early 21st century : Innovation, clean power and modern industrial policy

Contact:

Jonas Algers\ Doctoral student at Environmental and Energy Systems Studies\ Lund University\ jonas [dot] algers [at] miljo [dot] lth [dot] se (jonas[dot]algers[at]miljo[dot]lth[dot]se)

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