Pricing the green transition: An investment appraisal of Romanian low-carbon steel

Steel is a hard to abate energy-intensive industry that is not on track to achieve net-zero emissions by 2050, as its decarbonization is costly and faces significant challenges. Despite limited fiscal capacity, there is a plan in Romania to produce low-carbon steel. We draw on a unique dataset collected by the Energy Policy Group estimating a production cost between €537 and €794 per ton of low-carbon steel. Based on this, we analyze the decarbonization of Romania's sole primary steel producer—one of the top 10 most polluting steel plants in the European Union—using a marginal shift analysis and an investment appraisal. The emissions of this steelmaker currently stand at 1.87 tons of carbon dioxide per ton of steel, and its ambition is to become carbon neutral by 2030. Our scenario analysis examines the outcomes of decarbonization under different hydrogen sourcing strategies and reveals that a 15% price premium is needed for green steel to be competitive when hydrogen is purchased externally as opposed to being produced on-site through electrolysis. Without this premium, the net present value analysis from 2030 to 2050 estimates a cumulative loss between €3.3 and €8.7 billion. These results are highly sensitive to hydrogen sourcing and electricity prices, underscoring the importance of infrastructure, price certainty, and policy support in achieving decarbonization.