The report ”Climate Transition and Industry”* examines how Swedish industry is affected by the climate transition. It summarizes how different instruments work to promote the green transition.
The report was written by Tommy Lundgren, Swedish University of Agricultural Sciences, Runar Brännlund, Umeå University, and Mattias Vesterberg, Umeå University, commissioned by Growth Analysis.
– ”We have looked at how environmental investments and expenditures are influenced by climate policy, and whether there is room for energy efficiency improvements in the industry,” says Tommy Lundgren.
One conclusion is that the profitability of investments in green steel is expected to largely depend on developments in the electricity market and electricity prices, particularly how integrated the price areas within the Nordic region and Europe are.
The authors offer several recommendations in the report. Among other things, they suggest that policymakers should be cautious in designing climate measures that rely on the assumption that they will drive efficiency and profitability, as there is currently no evidence supporting that climate policy benefits industrial productivity.
Summary of Results
- A stringent climate policy generally does not boost industrial productivity (Porter Hypothesis).
- Environmental investments and expenditures are somewhat positively influenced by climate policy, which presents a risk that environmental investments might crowd out conventional investments.
- Climate policy, particularly in terms of carbon pricing, works in reducing emissions, but its effects on production, investment, and employment are less clear. However, our new empirical study suggests that climate policy can have a weak but positive effect on investments and employment.
- There is room for energy efficiency improvements in the industry. However, a rebound effect exists with energy efficiency measures, which prevents them from being fully realized in energy savings.
- The profitability of green steel investments depends on several factors, including the demand and price of green steel, investment costs, the price of inputs, and the return on alternative investments. The societal profitability of these investments largely depends on developments in the electricity market and electricity prices, particularly how integrated the price areas within the Nordic system are and how connected the Nordic region is to the rest of Europe.
Link to report: https://www.tillvaxtanalys.se/publikationer/rapport/rapportserien/2024-10-18-klimatomstallningen–och-industrin.html