Industrial decarbonization and hydrogen: The politics and economics of sustainable structural transformation

Event Type
Conference

Location / Date
Potsdam, 28.10.2025 until 29.10.2025

IDOS, Research Network Sustainable Global Supply Chains, Centre for Sustainable Structural Transformation (CSST), Research Institute for Sustainability (RIFS)

The industrial sector accounts for a quarter of global direct CO₂ emissions. Hard-to-abate heavy industries, such as steel, chemical, cement and aluminium, account for the bulk of these emissions. Decarbonizing them is essential to cope with global warming, but also challenging due to the need to coordinate upstream and downstream investments, and the different pathways offered by alternative technologies. Low-emission hydrogen plays an essential role as energy carrier or feedstock, and it requires new investments in various related technologies (electrolysis, CCUS, DRI steel production, specialised vessels, etc.) and infrastructures (solar and wind parks, pipelines, terminals, transmission grids, etc.). The shift to low-emission hydrogen may therefore trigger profound changes in industrial structures, trade relations, geography of production and global value chains.

A significant share of green (based on renewables) and blue (using natural gas with CCUS) hydrogen supply is expected to come from developing/ emerging economies, providing them with new industrial development opportunities. Different industrial decarbonization and hydrogen development pathways are possible, and indeed reflected in national hydrogen strategies, with different emphasis on renewables or natural gas, production of different derivatives, and different combinations of exports and local use for domestic industry decarbonization.

How beneficial these different options can be in terms of economic, social and environmental development, however, and which combination of technologies and policies may provide the best choice for any given country, is uncertain. Uncertainty is further enhanced as industrial decarbonization and hydrogen pathways depend on political commitments, which in turn are highly contested. The choice and formation of techno-economic pathways thus depends on political settlements among domestic and international interest groups within a fast evolving international political economy order.  

In a nutshell: Industrial decarbonization and the related ramp-up of low-emission hydrogen offer a wide range of promising development opportunities for low- and middle-income countries. Yet, huge knowledge gaps remain especially at the intersection of what is technologically, politically and socially feasible. Research from different disciplinary angles and using a variety of methodological needs to be combined to gain a better understanding of which pathways are likely to emerge as well as their development impacts.

This conference will take stock of new research insights into the opportunities and challenges related to industrial decarbonization and the ramp-up of low-emission hydrogen. It places particular emphasis on techno-economic pathways and policies that may lead to inclusive and sustainable development in low- and middle-income countries. It will be structured along five interrelated themes:

1. Technology choice and uncertainty. While there is broad consensus on the urgency of accelerating industrial decarbonization, the choice of technological pathways remains contested, with a diverse range of low-carbon and carbon-neutral solutions competing to replace fossil fuels. Moreover, considerable uncertainty persists about societies’ willingness and ability to absorb the cost differential compared to conventional fossil alternatives. This uncertainty holds investments back and influences market dynamics. Hydrogen, in particular, illustrates these challenges: The market is currently shifting from the first-best option, green hydrogen, toward the second-best alternative, blue hydrogen. Similar trade-offs and competition exist across other decarbonization pathways, such as direct electrification, biofuels, carbon capture utilization and storage (CCUS), and synthetic fuels. 
   What trends do we observe in terms of prices, investments, and technological adoption across decarbonization pathways? To what extent do transitional technologies (such as blue hydrogen) pave the way for, or rather hinder, investment into fully carbon-neutral solutions? What are the implications for countries betting on specific technologies as the backbone of their decarbonization strategies?
2. Reconfiguration of global value chains and the emerging geoeconomics of decarbonization: Decarbonization of energy-intensive industries and the shifts to low-emission hydrogen are expected to lead to major reconfigurations of global value chains. Energy supply chains may be redirected from (a few) fossil fuel exporters to (potentially many) hydrogen exporters. The choice of locations for energy-intensive industries (such as steel and fertilisers) and intermediate products (such as sponge iron and ammonia) may change, shifting value-added closer to clean energy sources. For some new upstream (e.g. electrolysers) and downstream (e.g. sustainable aviation fuels) industries, new global value chains will emerge, yet their contours and geographic patterns are entirely unclear at this stage. At the same time, industrial policy and geoeconomic considerations are playing an increasing role in shaping decarbonization policies. Decarbonization leaders are introducing trade policies, like the EU’s carbon-border adjustment mechanism, and investment support is increasingly tied to domestic content requirements. Decarbonisation laggards like the US have become major exporters of fossil fuels and their green industrial policies are losing momentum.
   To what extent will traditional patterns be replicated, with knowledge-intensive activities and jobs located in the “North” (including China) and labour- and resource-intensive activities in the “South”? What are the changes we are starting to observe, which industries will be affected and how, and who stands to gain or lose from the expected restructuring? What role does industrial and trade policy play in shaping an emerging net-zero economic geography? 
3. Value creation and industrial policies for low and middle-income countries. National hydrogen strategies of developing/ emerging economies across the board reflect a strong will to use hydrogen for strengthening domestic industries and creating value domestically. The strategies, however, target different industries, dependent, of course, on country-specific industrial structures, capabilities and resource endowments.
   Which opportunities exist for different countries to drive a process of sustainable structural transformation? How complex are the targeted industries, what are relevant entry barriers – both domestic and global - that may hinder competitive domestic manufacturing? What are promising upgrading strategies, and which industrial policies are required to increase value creation, skilled employment and technological learning? How are countries addressing the investments coordination challenges associated with industrial decarbonization and hydrogen and which kind of institutional coordination mechanisms have been deployed?
4. The political economy of industrial decarbonization and hydrogen investments. Industrial production is highly dependent on institutional frameworks, as low-emission hydrogen competes with fossil alternatives and will not thrive without special incentives – carbon pricing, sectoral decarbonization roadmaps, subsidies and the like. These frameworks, in turn, depend on existing industrial structures and the power relations they entail, e.g. between constituencies benefitting from the status quo and those willing to exploit low-carbon alternatives. Understanding political economy factors is therefore crucial for predicting, and eventually accelerating, the sustainable structural transformation of industries – especially in countries where both fossil-fuel vested interests and low-emission hydrogen potentials are huge (especially the MENA region and Sub-Saharan Africa). 
   What do we know about actor constellations promoting or blocking industrial decarbonization and the ramp-up of the hydrogen production for structural transformation? Which stages of the hydrogen value chain are more prone to resistance from incumbents and powerful groups? To what extent can fossil energy-exporting countries build on incumbent industries to reap the benefits of low-emission alternatives? What might be elements of transition pathways? Which coalitions could drive hydrogen investments?
5. Governance, sustainability and benefit-sharing. Additionally, there are many open questions related to the multi-level governance of decarbonization and low-emission hydrogen. Active governance is crucial for reducing uncertainty and harmonizing national policies and standards to develop international markets for hydrogen and climate-friendly industrial products. Another key challenge is the management of trade-offs between the speed of the hydrogen ramp-up, on the one hand, and the implementation of stringent sustainability criteria to effectively manage and mitigate adverse environmental and social impacts. This includes international partnerships and governance frameworks to ensure that economic benefits not only accrue in today’s industrialized economies but also contribute to green industrial development in renewable-rich countries in the Global South. For countries where industrial linkages, knowledge spillovers and employment effects remain limited, benefit-sharing mechanisms may become the primary way of ensuring wider societal benefits and ensure societal acceptance for large-scale hydrogen projects. These may range from direct payments to citizens to oversizing of electricity and freshwater supply.
   How can industrial decarbonization and the market ramp-up of hydrogen be governed so that sustainability criteria are met without disincentivizing investments, especially in the early stages? What can be learned from other sectors with more established sustainability governance mechanisms (e.g. sustainability standards and certifications)? How might sustainability governance affect global market and supply chain development, e.g. in terms of segmentation and geographic configuration? What approaches are there for ensuring benefit-sharing? What lesson can be learned from past experience with such approaches? Which measures are appropriate without undermining the cost-competitiveness?  

Call for Papers

Researchers willing to contribute to this conference are invited to submit abstracts to (socioeconomic@idos-research.de) in the range of 600-800 words related to one of the main conference themes by April 27, 2025. We particularly encourage contributions on, and from, low- and middle-income countries with big ambitions in this field. Submissions will be evaluated and selected by an international scientific committee.

The conference will offer a space to present new relevant research and to discuss with policymakers. The conference will include keynotes, academic paper sessions as well as research and policy panels. Speakers and panellists include Dawud Al-Ansari (Majan Council, Oman); Ha-Joon Chang (SOAS-University of London); Gonzalo Escribano (Elcano Royal Institute, Spain); Dolf Gielen (Hydrogen Lead, World Bank, tbc); Arunabha Ghosh (Director CEEW, India, tbc); Steven Griffiths (Sharjah University, UAE); Steffen Hertog (London School of Economics); Badr Ikken (Green Innov Industry Investment and former Director IRESEN, Morocco); Pamela Mondliwa (Industrial Development Corporation, South Africa) Susana Moreira (Executive Director, H2Global Foundation, Germany), Javiera Petersen (Under-secretary of Economy and Small Business of Chile; Kirsten Westphal (BDEW-German Association of Energy and Water Industries).

We aim at publishing a set of conference papers in a special issue and are currently exploring options with leading journals at the interface of technology, environment and social sciences.

If needed, travel expenses can be covered upon request, especially for speakers from low- and middle-income countries.

Hinweis

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