248three research questions: (1) was it an effective environmental policy? (2) was it an effective industrial policy? (3) was it an effective social policy? The answer is: no, no, no.

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251Directionality in Innovation Policy

and the Ongoing Failure of Green Deals:

Evidence from Biogas, Bio-ethanol,

and Fossil-Free Steel

Christian Sandström and Carl Alm

Abstract Environmental policy is no longer only about imposing regulations on industry. It is increasingly regarded as industrial policy. Both the European Union and national governments are taking more active roles in initiating green deals and various technologies aiming at sustainable development. In this chapter, we describe and discuss some recent experiences of green innovation policies. Historical examples concerning efforts in both biogas and ethanol are combined with a more contemporary description of fossil-free steel, i.e., steel made using hydrogen instead of coal. We argue that the presence of large public funds from different funding bodies such as the European Union, various government agencies, and municipalities has distorted incentives, making it rational for ﬁrms to pursue technologies without long-term potential. The result has been an absence of sustainable development, mounting debt, and ﬁnancial problems for the actors involved. We explain these results and draw policy conclusions concerning the risks related to green deals. Relatedly, we argue that the European Union’s current efforts in hydrogen gas face similar challenges.

Keywords Green deal · Biogas · Policy failure · Entrepreneurial state · Directionality

C. Sandström (*) Jönköping International Business School, Jönköping, Sweden The Ratio Institute, Stockholm, Sweden e-mail: christian.sandstrom@ju.se C. Alm The Ratio Institute, Stockholm, Sweden