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HYBRIT: A Hubristic Hydrogen-Based Steel Project

Author

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  • Henrekson, Magnus

    (Research Institute of Industrial Economics)

Abstract

This study critically examines HYBRIT, a Swedish flagship project led by state-owned LKAB to produce fossil-free sponge iron using hydrogen from fossil-free electricity. Framed as central to EU's green transition, HYBRIT promised CO₂ cuts exceeding Sweden's total emissions but faced major technological, economic, and infrastructural hurdles. The analysis situates HYBRIT within broader "moonshot†policies, prone to political enthusiasm, rent-seeking, and neglect of opportunity costs. The project required large-scale hydrogen production, storage, and process adaptation, unproven at commercial scale. Profitability depended on persistently low electricity prices and high CO₂ costs while global competition in green steel intensified. Electricity constraints in northern Sweden further strained feasibility. Political, regional, and corporate interests nonetheless aligned behind HYBRIT, aided by limited scrutiny of state-owned firms. Mounting criticism and shifting priorities ultimately led LKAB to defer its sponge iron plans indefinitely, pivoting toward high-grade ore and critical minerals. The case highlights the risks of mission-oriented policies when political symbolism outweighs technological and market realities.

Suggested Citation

  • Henrekson, Magnus, 2026. "HYBRIT: A Hubristic Hydrogen-Based Steel Project," IZA Discussion Papers 18359, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18359
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    References listed on IDEAS

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    1. Magnus Henrekson & Christian Sandström & Mikael Stenkula, 2024. "Moonshots and the New Industrial Policy: Questioning the Mission Economy," International Studies in Entrepreneurship, in: Magnus Henrekson & Christian Sandström & Mikael Stenkula (ed.), Moonshots and the New Industrial Policy, pages 3-28, Springer.
    2. Jeff Muldoon & Derek K. Yonai, 2023. "A wrong but seductive idea: Public choice and the entrepreneurial state," Journal of the International Council for Small Business, Taylor & Francis Journals, vol. 4(4), pages 351-361, October.
    3. Jan Schnellenbach, 2024. "A Behavioral Economics Perspective on the Entrepreneurial State and Mission-Oriented Innovation Policy," International Studies in Entrepreneurship, in: Magnus Henrekson & Christian Sandström & Mikael Stenkula (ed.), Moonshots and the New Industrial Policy, pages 61-76, Springer.
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    Cited by:

    1. Magnus Henrekson & Christian Sandström & Mikael Stenkula, 2026. "The Pitfalls of Green Deals: Introduction and Synthesis," International Studies in Entrepreneurship, in: Magnus Henrekson & Christian Sandström & Mikael Stenkula (ed.), A Green Entrepreneurial State?, pages 3-32, Springer.

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    Keywords

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    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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