The iron and steel sector and the chemicals sector together account for around 11% of global carbon dioxide (CO_₂) emissions. One option for decarbonising these energy-intensive industries is to relocate industrial production to world regions with favourable renewable energy conditions and low green energy costs. This potential “renewables pull” effect poses both risks and opportunities for coal regions, many of which are also home to energy-intensive industries but have quite different renewable energy conditions. In February 2025, the Expert Exchange on Renewables Pull for a Just Energy Transition brought together experts to discuss the implications of this effect for coal regions.

Research insights

Patricia Sophia Wild from the International Renewable Energy Agency (IRENA) sketched out the concept of the renewables pull effect and its potential impacts—which may lead to energy-intensive industries moving to regions with abundant renewable energy sources in order to reduce their costs and carbon emissions. The potential for such relocations is especially high for the steel and chemicals industries, where green hydrogen is becoming a viable alternative to fossil fuel. Julien Armijo, an independent scientist, noted that electrofuels (synthetic ammonia, synthetic methanol, and synthetic kerosene) offer promising solutions for decarbonising certain parts of the transport and industry sectors. While recent project announcements indicate that the renewables pull effect is relevant for e-ammonia, the same cannot be said for e-methanol and e-kerosene. For these fuels, the energy cost advantage of renewables-rich regions may be less relevant, because they also require a carbon feedstock. Biomass could be used as a climate-neutral carbon source, but biomass is often in short supply in renewables-rich regions: specifically, regions with high wind or solar potential are often coastal or arid, without high biomass potential. Using CO₂ from direct air capture (DAC) could be an alternative for renewables-rich regions, but DAC technology requires further cost reductions to become viable.

The discussion emphasised that financial tools—such as blended finance, risk guarantees, and carbon pricing—are crucial for attracting investment in green hydrogen infrastructure. However, while policies like public procurement of green steel and hydrogen products can drive demand in countries with fiscal power, countries without the fiscal power find it difficult to attract green hydrogen investment despite their abundant renewable energy potential. Hence, the lack of coordinated industrial policies among countries threatens to worsen, rather than reduce, global inequalities during the green transition.

Hilton Trollip from the University of Cape Town and the Institute for Sustainable Development and International Relations (IDDRI) explained that South Africa’s steel industry, despite having strong potential for green iron production, faces challenges in attracting such investments because the South African government is unable to match the financial support provided by the EU to steel companies investing in Europe in the form of state grants. He emphasised that without coordinated international policy action, steelmakers that are not in receipt of a state grant will face significant economic disadvantages in decarbonising their production.

Similarly, as mentioned by Gregor Clark from Global Energy Monitor, Brazil, which is the world’s second-largest producer of iron ore, also faces an urgent need to transform its steel industry. With over half of Brazil’s blast furnaces requiring relining by 2030, the country has a timely opportunity to transition to hydrogen-based direct reduced iron (HDRI) manufacturing. He emphasised that although Brazil has the potential to lead in green iron production, the country needs clearer industrial decarbonisation policies and stronger incentives for both HDRI projects and electric arc furnaces.

Key takeaways

• Industries prioritise cost when relocating for renewable energy

Some industries appear to be attracted by regions with low green energy production costs—in particular, sectors like steel and ammonia production, which require green hydrogen to achieve significant emissions reductions.

• Mixed prospects for green industry development in the Global South

While HDRI, green ammonia, and climate-neutral synthetic fuels represent promising opportunities for economic development in the Global South, significant financial and infrastructure barriers continue to impede investments.

• Financial and policy alignment is critical

Steelmakers in developing countries need stronger financial support, including subsidies, carbon pricing, and public procurement policies, to compete in the global green economy.

• Investment in infrastructure is essential

Scaling green hydrogen production and distribution requires new investment in storage, transport, and renewable energy expansion.

• Industrial policy must be globally coordinated

Without harmonised trade and industrial policies, the green transition may exacerbate economic disparities rather than reduce them. The EU’s industrial policy has made 30 HDRI projects possible since 2020, but this has inadvertently created competitive disadvantages for countries outside the EU that lack similar financial support.

• E-fuels and market trends

The renewables pull effect appears to be evident in green ammonia project announcements, but not in green methanol or e-fuels project announcements. This is probably due to a lack of cheap carbon feedstock in many renewables-rich regions of the world. DAC could be a game-changer, if in the future it can deliver a climate-neutral carbon feedstock at moderate costs.

Speakers

Adriana Veizaga, Innovation Regions for a Just Energy Transition (IKI JET) Project

Patricia Sophia Wild, International Renewable Energy Agency (IRENA)

Hilton Trollip, University of Cape Town and Institute for Sustainable Development and International Relations (IDDRI)

Julien Armijo, Independent scientist, France

Gregor Clark, Global Energy Monitor, United States

Timon Wehnert, Wuppertal Institute for Climate, Environment, and Energy

Süheyb Bilici, Wuppertal Institute for Climate, Environment, and Energy

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Read more from our Expert Exchange series: Coal Mine Methane Emissions