257illegal to spend a municipality’s money abroad, and thus the situation became politically controversial. Once the great recession hit in 2008, both oil and ethanol prices fell sharply. Ethanol became less and less competitive over the coming years. Despite this fact, the SEA chose to provide an additional 33.8 million SEK over the coming years to develop the plant in Örnsköldsvik. A former SEA employee described the agency’s reasoning: “We never asked whether Sekab could become commercially viable.”

The primary reason for not questioning Sekab’s commercial viability was that the SEA’s mission was to fund basic and applied research. Commercialization was never part of its mission. Over the coming years, more public money was poured into Sekab as losses accumulated. Despite an economic catastrophe and the absence of a technological breakthrough, investments have continued. In 2018, an additional €4 million were received from the European Union over the coming 3 years. In the midst of this turmoil, Sekab has also received a lot of positive PR. In 2009, the firm received the international Sustainable Bioethanol Award prize, and Robert Silverman from the US embassy visited Sekab, primarily because President Barack Obama was interested in green technologies. In 2015, Sekab received the Örnsköldsvik municipality’s annual award for green business “for its efforts to supply society with sustainable chemicals and biofuels.”

4

The European Union, Hydrogen Gas,

and Fossil-Free Steel

As the European Union rolls out its Green Deal across member countries, new projects and initiatives take shape. New policies and support structures are currently implemented across the continent, and it is important to gain insights into this process at the national level. One such example can be seen in Sweden, where steel manufacturer SSAB joined forces with electricity giant Vattenfall and the mining company LKAB to develop what they refer to as fossil-free steel.

258C. Sandström and C. Alm

Below, we provide a critical discussion of these policies in general and of Hybrit and the Swedish experience in particular. We argue that the supposedly green steel is actually not good for the environment and explain why it presents a real danger to the economy, because it may result in electricity shortages across the country. The primary reason for this idea’s emergence relates to the massive EU funds that have been made available for such projects. Together, these funds result in distorted incentives, making it rational for firms to pursue irrational technological ventures because someone else is paying for a large portion of the resources.

4.1

Hybrit and Green Steel

Hybrit is an attempt by three firms to jointly develop green steel. This refers to steel made using hydrogen gas instead of coal. Today, steel accounts for a considerable portion of Sweden’s carbon dioxide emissions, and if Hybrit succeeds with its plans,