Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.
Non-technical summaryThe iron and steel industry is one of the most carbon emitting and energy consuming sectors in Europe. At the same time this sector is of high economic importance for the European Union. Therefore, while public environmental and energy policies target this sector, there is political concern that it suffers too much from these policy measures. Various actors fear a policy-induced decline in steel production, and possibly an international reallocation of production plants. This study analyzes the role that input prices and public policies may play in attaining an environmentally more sustainable steel production and how this -in turn -affect total steel output. As we find out for examples of major European steel producing countries, a kind of rebound effect of energy-efficiency improvements in steel production on total steel output may arise.In the recent years nearly 70% of the crude steel supplied worldwide has been produced by using the blast furnace/basic oxygen (BF/BOF) production route. About 29% of the crude steel is produced by using the Electric Arc Furnace (EAF) production route. Instead of iron ore and coke, scrap is used as main feedstock for this production route. In the EU, currently only these two production routes are in use to a significant extent. Therefore our analysis is focused on the BF-BOF and EAF production routes. Regarding crude steel production, specific energy demand and CO 2 emissions vary significantly depending on which production route is selected. Taking into account the high energy demand which is needed for feedstock preparation, the energy demand of the BOF route is significantly higher than the one of the EAF route.As we found out and as economic intuition suggests, higher energy prices tend to raise energy efficiency (or tend to reduce specific energy consumption) in the steel sector. This tie between energy-price/-efficiency is due to economic agents' reaction to the price signal: they raise their efforts to diminish the adverse price-effect on their profits by lowering the use of the now more costly input. However, there are different forms of energy inputs (e.g. electricity, coking coal, gas) in the steel sector and divergent paths (e.g. change of production routes or improvement of efficiency within one route) to attain lower specific energy consumption. The consequences of individual responses to energy price changes are far from being obvious. If electricity prices rise, for example, then a natural o...
