Energy-intensive industry: importing selected primary products and securing value creation and jobs

High energy costs in Germany put the country at a disadvantage in international competition. Since the discontinuation of Russian natural gas, this affects not only fossil fuels, but also renewable electricity and green hydrogen in the long term. The authors of the Ariadne report “Transformation of the energy-intensive industry write that to compensate for this disadvantage permanently and politically across the breadth of industrial sectors. Competitiveness through structural adjustment and green imports” requires high subsidies, is economically inefficient and can hardly be implemented politically. Replacing fossil fuel imports completely with green energy sources is not realistic - as green hydrogen and renewable electricity are still in short supply and are more difficult to transport than coal, oil or natural gas.
Instead, the research team proposes shifting the current import of fossil energy and raw materials towards the import of green primary products and concentrating more on the high added value in industrial processing. For example, the steel industry could import green pig iron in future and process it into steel in Germany instead of importing iron ore as it does today. Only the most energy-intensive step would then be shifted abroad. Jobs in the steel industry and downstream steel-intensive companies could be kept in Germany. “Friendshoring” to friendly European countries with better availability of renewable electricity could both reduce costs and ensure security of supply.

If the German primary industry imports more primary products in the long term, the future demand for hydrogen would be lower than assumed, according to the report. At the same time, a substantial demand for hydrogen remains in some industrial sectors, which is why a strategy with a realistic target for hydrogen is necessary. For a transformation of the industry, the authors of the Ariadne Report recommend the development of an overall strategy that is both embedded in Europe and coordinated across various policy areas. A controlled structural change could largely prevent the loss of jobs and value creation and strengthen the competitiveness of the industry in Germany.