Inefficient Investments as a Key to Narrowing Regional Economic Imbalances

Policy led decisions aiming at decarbonizing the economy may well exacerbate existing regional economic imbalances. These effects are seldomly recognised in spatially aggregated, top-down and techno-economic decarbonization strategies. Here, we present a spatial economic framework that quantifies the gross value added associated with low carbon hydrogen investments while accounting for region-specific factors, such as the industrial specialization of regions, their relative size, and their economic interdependencies. In our case study, which uses low carbon hydrogen produced via autothermal reforming combined with carbon capture and storage to decarbonize the energy intensive industries in Europe and in the UK, we demonstrate that interregional economic interdependencies drive the overall economic benefits of the decarbonization. Policies intended to concurrently transition to net zero and address existing regional imbalances, as in the case of the UK Industrial Decarbonization Challenge, should take these local factors into account.