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

Author

Listed:
  • Giacomo Benini

    (Department of Business and Management Science, Norwegian School of Economics)

  • Erik Enstad

    (Department of Business and Management Science, Norwegian School of Economics)

  • Amare Alemaye Mersha

    (Department of Economics, Management and Quantitative Methods, University of Milan)

  • Luca Rossini

    (Department of Economics, Management and Quantitative Methods, University of Milan; Fondazione Eni Enrico Mattei)

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

  • Giacomo Benini & Erik Enstad & Amare Alemaye Mersha & Luca Rossini, 2025. "Shadow Price Signals in the Steel Sector: From Efficiency Gaps to Policy Maps," Working Papers 2025.22, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2025.22
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    References listed on IDEAS

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    1. Golany, B & Roll, Y, 1989. "An application procedure for DEA," Omega, Elsevier, vol. 17(3), pages 237-250.
    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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