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Impact of global heterogeneity of renewable energy supply on heavy industrial production and green value chains

Author

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  • Philipp C. Verpoort

    (Potsdam Institute for Climate Impact Research)

  • Lukas Gast

    (Potsdam Institute for Climate Impact Research)

  • Anke Hofmann

    (Potsdam Institute for Climate Impact Research)

  • Falko Ueckerdt

    (Potsdam Institute for Climate Impact Research)

Abstract

On the path to climate neutrality, global production locations and trade patterns of basic materials might change due to the heterogeneous availability of renewable electricity. Here we estimate the ‘renewables pull’, that is, the energy-cost savings, for varying depths of relocation for three key tradable energy-intensive industrial commodities: steel, urea and ethylene. For an electricity-price difference of €40 MWh−1, we find respective relocation savings of 18%, 32% and 38%, which might, despite soft factors in the private sector, lead to green relocation. Conserving today’s production patterns by shipping hydrogen is substantially costlier, whereas trading intermediate products could save costs while keeping substantial value creation in renewable-scarce importing regions. In renewable-scarce regions, a societal debate on macroeconomic, industrial and geopolitical implications is needed, potentially resulting in selective policies of green-relocation protection.

Suggested Citation

  • Philipp C. Verpoort & Lukas Gast & Anke Hofmann & Falko Ueckerdt, 2024. "Impact of global heterogeneity of renewable energy supply on heavy industrial production and green value chains," Nature Energy, Nature, vol. 9(4), pages 491-503, April.
    • Handle: RePEc:nat:natene:v:9:y:2024:i:4:d:10.1038_s41560-024-01492-z
    DOI: 10.1038/s41560-024-01492-z
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    References listed on IDEAS

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