Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2021:18: A Scenario Analysis of the Potential Effects of Decarbonization on the Profitability of the Energy-Intensive and Natural-Resource-Based Industries

Fredrik N. G. Andersson ()
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Fredrik N. G. Andersson: Department of Economics, Lund University, Postal: School of Economics and Management, Box 7080, S-220 07 Lund, Sweden

Abstract: The decarbonization of the energy-intensive and natural-resourced-based industries is associated with large economic costs. In this paper, I explore how decarbonization may affect the profitability and market value of these industries and their ability to attract capital to fund their decarbonization. I also discuss the possibility of compensating for the investment costs through higher prices and enhanced productivity. I answer these questions using scenario analysis with a focus on the industries in the European Union and the United States. I find that the effects on profitability are likely to be modest despite relatively high investment costs.

Keywords: decarbonization; energy-intensive; industry; profitability; investment

JEL-codes: L60; L70; Q54

Language: English

36 pages, December 17, 2021

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