2522009; Karlson et al., 2021) and deserves to be scrutinized in further detail.

In this chapter, we provide a critical discussion of this policy shift by raising a couple of cases of policy failure. The first two are historical yet fairly recent examples from the 2000s and concern biogas and ethanol from cellulose. They can both be regarded as policy failures as (1) they have not resulted in a transition to a more sustainable use of resources, and (2) taxpayers and publicly owned businesses have incurred significant costs and accumulated large amounts of debt. These two cases help us identify a couple of factors that together point out the downside of active industrial policies. The chapter suggests that large amounts of public money in the form of technology-specific R&D support programs, soft loans, and directed, supposedly free money distort incentives result in malinvestments, i.e., poorly allocated investments. We end the chapter with a concluding remark regarding potential risks and hazards related to interventionist industrial policies.

The insights developed from the first two cases are subsequently applied to the ongoing developments concerning the European Union’s efforts related to hydrogen gas and the evolution of supposedly fossil-free steel. We argue that fossil-free steel is in fact not fossil free, and we point out the risks of these ventures and argue they will harm both the environment and the economy.

2

Theoretical Background

An emerging consensus in society is that economic growth needs to be combined with sustainable development. Historically, these two goals have primarily been accomplished by imposing taxes, subsidies, and complete bans on certain emissions. The interplay between technology development and regulation has resulted in considerable advances (Porter & van der Linde, 1995). In industrialized countries like Sweden, 24 out of 26 harmful substances have been reduced since 1990, despite a GDP increase of 85%. For Sweden, carbon dioxide is down 28% since 1990; adjusted for GDP growth, the decline is 60% (Grafström & Sandström, 2020).