The withdrawal of ArcelorMittal from its planned climate-friendly steel production in Germany is, according to leading economist Veronika Grimm, a warning signal for the German government's industrial policy.
"The transformation to green steel was an enormous challenge from the outset," Grimm told Reuters news agency on Friday. The high requirements for the transformation process, combined with elevated electricity prices, meant that these projects were fraught with significant risks from the very beginning. "It was foreseeable that these negotiations would fail," Grimm said.
Grimm, a professor of energy systems at the Technical University of Nuremberg, is a member of the German Council of Economic Experts. According to media reports, Katherina Reiche (CDU), the Minister for Energy Policy, also plans to appoint Grimm to a dedicated advisory panel of economists.
GRIMM: POLICY SHOULD FOCUS ON FRAMEWORK CONDITIONS
Grimm criticized the previous government's approach, which prioritized billions in state subsidies over structural reforms. One issue, she said, is the so-called climate protection contracts, designed to support companies in transitioning to climate-neutral production methods. "Especially with these contracts, there is a prevailing belief that the transformation can be managed by the state and, through tenders, achieved at particularly low cost. This is proving to be an illusion," Grimm stated. The processes are too complex, too lengthy, and often do not lead to success in the end.
As an alternative, Grimm called for greater pragmatism: "During the transformation phase, for example, we should rely on gas and blue hydrogen." Rather than a complex system of subsidies, emissions trading should be strengthened.
Blue hydrogen is produced using natural gas, with the resulting CO2 being captured and stored. In contrast, green hydrogen is generated using renewable energy sources.
ArcelorMittal is not an isolated case, Grimm noted. The promise of substantial state subsidies does not automatically lead to success: "Policy should urgently focus on improving structural framework conditions, rather than attempting to drive transformation through subsidies."
(Reporting by Holger Hansen, edited by Elke Ahlswede. For questions, please contact our editorial teams at berlin.newsroom@thomsonreuters.com (for politics and economic affairs) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).
- by Holger Hansen
