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Shadow Price Signals in the Steel Sector: From Efficiency Gaps to Policy Maps

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  • Benini, Giacomo
  • Enstad, Erik
  • Mersha, Amare Alemaye
  • Rossini, Luca

Abstract

This study provides the first global, plant-level analysis of technical and environmental efficiency in steel production using data from 143 mills across 50 countries (2019–2023). Using a Stochastic Directional Distance Function, we estimate plants’ distance to the frontier and compute shadow prices of CO2e emissions. Results show efficient electric arc furnace mini-mills, common in North America, face high abatement costs and low inefficiency. Conversely, integrated plants in developing countries are inefficient but can abate cheaply, with Europe in between. Shadow prices remain well below carbon market rates, underscoring the need for tailored climate policies.

Suggested Citation

  • Benini, Giacomo & Enstad, Erik & Mersha, Amare Alemaye & Rossini, Luca, 2025. "Shadow Price Signals in the Steel Sector: From Efficiency Gaps to Policy Maps," FEEM Working Papers 376263, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemwp:376263
    DOI: 10.22004/ag.econ.376263
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    2. Zhou, P. & Zhou, X. & Fan, L.W., 2014. "On estimating shadow prices of undesirable outputs with efficiency models: A literature review," Applied Energy, Elsevier, vol. 130(C), pages 799-806.
    3. Peng Wang & Morten Ryberg & Yi Yang & Kuishuang Feng & Sami Kara & Michael Hauschild & Wei-Qiang Chen, 2021. "Efficiency stagnation in global steel production urges joint supply- and demand-side mitigation efforts," Nature Communications, Nature, vol. 12(1), pages 1-11, December.
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