A new study by researchers Mara Bălașa and Professor Rickard Sandberg of the Stockholm School of Economics explores what it might take to make that transformation happen. Their work focuses on Romania’s only primary steel producer, Liberty Steel Galați, a massive industrial complex with a long history and an uncertain future, given its recent closure and current restructuring that involves selling it through an international auction.

The study does more than describe the challenge. It attempts to calculate the real financial cost of turning conventional steel production into a low carbon operation.

The results offer a revealing glimpse into the economics of the green transition. They show that cleaner steel is technically possible, but making it competitive will require significant investment, supportive policies, and careful choices about energy and technology.

Many industries can cut emissions by switching to renewable electricity. Steelmaking is more complicated. Traditional steel production relies on blast furnaces fueled by coal. Coal is not only an energy source but also a chemical ingredient that helps turn iron ore into metal. Replacing that process requires a fundamentally different technology.

One of the most promising alternatives uses hydrogen instead of coal. In this method, iron ore is converted into iron using hydrogen gas, which removes oxygen from the ore while producing water vapor rather than carbon dioxide. The resulting iron can then be melted in electric arc furnaces powered by electricity, ideally from renewable sources.

This hydrogen-based process could dramatically reduce emissions. However, it also requires large quantities of electricity and hydrogen, both of which can be expensive and uncertain in supply.

This is where the research by Mara Balașa and Professor Rickard Sandberg becomes important. Their study looks closely at how these costs play out in a real industrial setting.

Liberty Steel Galați is not just any steel plant. It is one of the largest industrial facilities in Romania and among the more polluting steel producers in the European Union. When operational, it generates about 1.87 tons of carbon dioxide for every ton of steel produced.

At the same time, the plant is central to the regional economy. Thousands of jobs and numerous supplier companies depend on it. For policymakers, allowing the plant to close is not a simple option. Transforming it into a cleaner operation could protect jobs while advancing climate goals.

The company has announced an ambitious plan to become carbon neutral by 2030. Achieving that goal would involve replacing the existing coal based production route with a new system built around hydrogen and electric furnaces.

To understand whether such a transition makes economic sense, Bălașa and Sandberg analyzed a detailed dataset on projected production costs. Their work builds on data compiled by the Energy Policy Group, which estimates the expenses involved in producing low carbon steel at Galați.

The numbers reveal just how expensive the shift could be. According to the researchers, producing low carbon steel at the Romanian plant could cost between €537 and €794 per ton. In their baseline scenario, the average cost is around €666 per ton. That figure is significantly higher than the estimated market price of conventional steel, which is roughly €585 per ton.

In other words, greener steel does not automatically pay for itself. The researchers used a method known as marginal shift analysis to estimate the price premium needed for green steel to compete with traditional production. Their results show that the answer depends heavily on how hydrogen is obtained.

If the steelmaker produces hydrogen on site through electrolysis, as the literature generally assumes, the process consumes enormous amounts of electricity. In that scenario, the plant might theoretically produce green steel slightly cheaper than conventional steel, should the electricity prices remain stable. However, the electricity demand would be enormous in practice. Producing hydrogen internally could push electricity consumption to levels that strain the national grid and potentially raise electricity prices across the country.

Because of this challenge, Bălașa and Sandberg explored a second scenario in which hydrogen is purchased from external suppliers. When hydrogen must be bought on the market, the economics change dramatically.

Under those conditions, green steel would need a price premium of about 15 percent to remain competitive. Without that premium, producing low carbon steel becomes financially difficult.

The researchers also examined the investment from a longer perspective. They calculated the net present value of switching the plant to green steel production over a twenty year period from 2030 to 2049.

Their baseline estimate shows a cumulative financial loss of about €3.3 billion if green steel sells at the same price as conventional steel. In other words, if markets do not reward lower emissions, the investment could struggle to generate positive returns.

The outcome is sensitive to many factors. Changes in electricity prices, hydrogen costs, or steel market prices could shift the results significantly. In the most optimistic scenarios, the project might even become profitable. In pessimistic scenarios, the losses could grow much larger. For Bălașa and Sandberg, this uncertainty highlights an important lesson. Decarbonizing heavy industry is not only a technological challenge but also an economic one.

The findings also show why government policy plays such a central role in industrial decarbonization. Programs such as carbon pricing, green procurement policies, or carbon contracts for difference could help bridge the gap between the cost of clean production and market prices. These mechanisms effectively reward companies for reducing emissions and provide financial certainty for large investments.

International trade policies could also influence the outcome. The European Union’s Carbon Border Adjustment Mechanism, for example, places carbon related costs on imported steel. This could reduce the advantage of cheaper but more polluting foreign production. Such measures might help create a market for low carbon steel and make investments like the one planned at Galați more viable.

The future of Liberty Steel Galați remains uncertain. The plant has faced financial strain in recent years and its restructuring is now taking place through an international auction. Yet its strategic importance for Romania means that policymakers are eager to find a sustainable path forward.

The research by Mara Bălașa and Professor Rickard Sandberg provides a roadmap for thinking about that future. By placing real numbers on the cost of decarbonization, the study clarifies the scale of the challenge and the decisions that lie ahead.

Steel built the modern world. Now the industry must reinvent itself for a low carbon future. The transition will require new technologies, vast amounts of clean energy, and supportive policies that reward environmental progress. If those pieces come together, the steel of tomorrow may still support bridges, cities, and railways. The difference is that it could do so without carrying the same heavy carbon footprint.