Financing high-cost measures for deep emission cuts in the basic materials industry – Proposal for a value chain transition fund

Artikel i vetenskaplig tidskrift, 2025

There are currently insufficient policy incentives for most producers of basic materials across Europe to invest in low-emissions technologies. This paper explores a novel approach to financing the investments required to accelerate the transition towards zero-emissions practices. To engage non-state actors in this process, and to formalise cross-sectorial collaboration, we explore the establishment of a Value Chain Transition Fund (VCTF). We use the European cement and steel industries as case studies. The VCTF, funded through a premium imposed on basic materials incorporated into end-products, would be used to finance investments in transformative technologies needed to meet emissions cuts along CO2-intensive supply chains, such as carbon capture on cement and steel plants and hydrogen direct reduction steel production. Our results show that the VCTF ensures that overnight investments and operational expenditures needed for carbon capture in the European cement and steel industries can be recouped in 6–8 and 2–6 years respectively, and for steel produced with hydrogen direct reduction it can be recouped in 3–16 years. The VCTF results in an increase in consumer prices of 0.2%–1.1% in the case of a passenger electric vehicle, and an increase of 0.3%–0.6% in production costs in the case of a high-speed railway, as examples of representative end products.