An analysis of the economic determinants of energy efficiency in the European iron and steel industry

The iron and steel industry has some of the highest levels of carbon emissions and energy consumption in Europe. At the same time, this sector is of great economic importance for the European Union. In this paper we investigate the technological, market and policy factors that are associated with a reduction in the specific energy consumption in iron and steel production. In addition, we analyze whether achieving more environmentally friendly production is accompanied by a decrease or an increase in production levels. We base our analysis on technical information about cost factors of steel production routes, historical data for prices of energy carriers, on prices for the feedstock in the iron and steel sector, on political framework conditions, and the demand for steel. As we find out, higher energy prices tend to raise energy efficiency (or tend to reduce specific energy consumption) in the steel sector. Yet, because lower specific energy consumption is related to higher total steel production, energy price increases might cause a kind of rebound effect, bringing about an increase in total production as a consequence of induced energy efficiency improvements. Taking this effect into account, the negative relation between input prices and total steel production is not very strong. In the short run, the wages of employees in the steel sector tend to have the biggest influence on total steel production. In the long run, GDP and investment climate exert the biggest influence. (C) 2015 Elsevier Ltd. All rights reserved.