Unlocking industrial decarbonisation: investment risk, policy uncertainty, and value chain opportunities

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Highlights the role of firm risk tolerance and coordination in industrial decarbonization investment decisions.

🏢実務担当者:Demonstrates cost pass-through along value chains and proposes a fund mechanism to share risks.

🏛政策担当者:Shows that combining EU ETS with demand-side pull and a VCTF can overcome investment barriers.

The deployment of capital-intensive technologies, such as Carbon Capture and Storage (CCS) in the cement industry and for hydrogen-based direct reduction of iron (H-DRI) in the steel industry, presents a unique challenge for industrial decarbonisation. These technologies require substantial up-front investments, while their site-specific nature limits learning effects and cost reductions. The large-scale deployment of decarbonisation technologies also relies on co-ordination across multiple actors to ensure the availability of an enabling infrastructure, which includes electricity grids (for H-DRI) and CO2 transport and storage networks (for CCS). As a result, production costs increase relative to conventional emissions-intensive processes.The European Union Emissions Trading System (EU ETS) plays a central role in addressing the cost gap between low-emissions production and conventional production. However, uncertainty regarding the future development of allowance prices limits the effectiveness of the EU ETS as a stand-alone driver of investment. While low-emissions materials are significantly more expensive at the production stage, this thesis shows that cost increases are considerably diminished when passed down-stream along the value chain, resulting in relatively modest impacts on the end-users. Thus, adopting a value chain perspective provides a more-comprehensive understanding of the implications of industrial decarbonisation, while demonstrating that deep emissions reductions can be achieved with comparatively small increases in the costs of the end-products.Despite this, current policy incentives are insufficient to trigger large-scale investments, and in addition this work shows that the required investment volumes for transitioning the EU cement and steel industries to near-zero emissions over the next 25 years far exceed historical levels in the EU. This thesis shows how co-ordination of actors along the value chains provides an opportunity in sharing the costs and risks associated with transformative technologies. It proposes a Value Chain Transition Fund (VCTF), which will leverage down-stream cost pass-through to help finance capital-intensive investments and overcome market barriers. The analysis shows that the imposition of small premiums on end-products could enable the recovery of CCS and H-DRI investments within a few years.Finally, this thesis shows that differences in firms’ willingness to make investment decisions under conditions of uncertainty play an important role in shaping the pace of industrial decarbonisation. While predictable policy frameworks are essential, investment decisions depend on the risk tolerance levels of companies, with frontrunners investing under uncertainty and others delaying until stronger incentives emerge. In addition, consumer willingness to pay for low-emissions materials acts as a complementary “pull” mechanism, accelerating adoption, particularly among risk-averse firms, and reinforcing the effect of long-term contracts. Overall, combining policy “push” with demand-side “pull” mechanisms is significantly more effective than solely relying in either of these.

• openalex https://doi.org/10.63959/chalmers.dt/5888first seen 2026-05-31 04:32:57 · last seen 2026-06-03 04:44:13