Agora Industry: Examining what a growing global market for green iron could mean for economies, jobs and household incomes

Agora Industry commissioned Cambridge Econometrics to examine what a growing global market for green iron could mean not only for steel decarbonisation, but also for economies, jobs and household incomes in the countries producing and importing it.

The study covered ten major steel-producing and steel-consuming economies, together accounting for around two thirds of global steel production and 60% of global steel consumption. It considered five potential exporters, Brazil, Australia, South Africa, Saudi Arabia, and Sweden, and five potential importers, China, Germany, Japan, South Korea and the United Kingdom.

Approach

Using our E3ME model, Cambridge Econometrics conducted a macroeconomic analysis of the impact of increasing green iron and steel production under multiple policy scenarios. The impacts on the iron and steel industries in the countries of interest were evaluated to assess the short- and long-term impacts of different development pathways for green iron and steel on employment, key industry sectors, and overall economic performance.

As a scenario simulation tool, E3ME is particularly suited to comparing alternative demand-led scenarios with structural changes. It allowed the analysis to look beyond the immediate impacts on the iron and steel industry, showing how changes in production and trade could flow through supply chains and the wider economy. By modelling the connections between countries, industries, energy use and the environment, it provided insights into potential impacts on employment, investment, trade, prices and household incomes. The same approach could be applied to understand the wider economic effects of technological and industrial transitions in other sectors.

The modelling compared two green iron trade scenarios with a baseline in which there is no green iron trade. In the mid-GIT scenario, importing economies source around half of their iron through green imports. In the full-GIT scenario, this rises to close to 100%. For exporting economies, the scenarios reflect increasing H₂-DRI production beyond domestic requirements to serve international demand.

This allowed the study to explore a broader question than where green iron could be produced most cheaply: what happens to economies and employment as the location of iron production and international trade patterns change?

Specifically, the analysis assessed:

• changes in GDP;

• employment effects within and beyond the iron and steel sector;

• changes in household income;

• Fiscal implications for potential green iron exporters and importers; and

• how outcomes differed under varying levels of international green iron trade

The analysis shows that green iron trade could support economic activity in both exporting and importing economies while contributing to steel decarbonisation. For exporters, producing green iron rather than exporting raw materials can create additional economic value, investment and employment. For established steelmaking economies, imports can support a transition away from coal-based ironmaking while retaining economic activity and employment further down the steel value chain.

Importantly, the results demonstrate that the effects extend beyond the iron and steel industry. New investment, changes in trade and income effects flow through other sectors, creating economic and employment impacts across the wider economy.

The analysis therefore provides an evidence base for considering how climate objectives, industrial competitiveness and economic development can be addressed together as new international green iron supply chains emerge.

Key findings

The modelling identifies significant potential economic gains from green iron trade, although the scale and distribution of those gains differ between exporting and importing economies. 

1. Green iron exports could create substantial economic and employment gains for producing countries. Under the mid-GIT scenario, Brazil could add US$19.8 billion to annual GDP and 202,000 jobs by 2050 compared with the no-GIT scenario. Australia could add US$11.1 billion and 87,000 jobs, while South Africa could gain US$6.6 billion and 161,000 jobs.
   
   Under more extensive green iron trade, the potential gains increase in several exporting economies. The published findings indicate that Brazil could gain up to US$40 billion in additional GDP and more than 400,000 jobs, while Australia could gain up to US$16 billion and around 110,000 jobs. 

2. Importing green iron could support established steelmaking economies as they move away from coal-based production. The modelling suggests that importing economies can continue to grow while decarbonising ironmaking. Under the mid-GIT scenario with large-scale decarbonisation, Japan gains 592,000 jobs and 0.62% more GDP by 2050 relative to the no-GIT scenario with limited decarbonisation; South Korea gains 336,000 jobs and 1.36% more GDP; and the UK gains 138,000 jobs and 0.06% more GDP.
   
   For Germany, GDP gains from green iron trade peak at US$72 billion in 2035, alongside household income that is 1.27% higher. Japan could gain around US$50 billion in GDP by 2050. The majority of these economic benefits are driven by decarbonisation efforts across all sectors and environmental tax reforms; they continue to hold true with the decoupling of iron and steelmaking.  

3. The modelling suggests there is an economic as well as a climate case for developing international green iron markets. The wider study estimates that green iron trade with economy-wide decarbonisation could reduce cumulative global emissions by more than 48% between 2025 and 2050 and reduce iron and steel sector carbon emissions by almost 30 gigatonnes, compared to current policy trajectories. The report argues that long-term offtake agreements, investment in renewable energy and hydrogen infrastructure, stable policy frameworks and international partnerships will be important to realising these benefits.

Outcomes

The research provides quantitative evidence on the potential macroeconomic implications of establishing global green iron supply chains and sets these alongside the case for steel decarbonisation.

The published recommendations identify practical steps for governments and industry, including developing trade partnerships, using concessional finance and public guarantees to support low-carbon iron production, stimulating demand through green procurement, securing long-term offtake agreements and supporting workforce retraining. The report highlights 2030 as an important milestone for long-term offtake agreements and argues that green iron trade needs to scale by 2035 if its potential economic and climate benefits are to be realised by mid-century.