The Gravity of Scrap – Frank Pothen

Speaker

Frank Pothen (Ernst-Abbe-Hochschule Jena (University of Applied Sciences))

Abstract

In 2022, global steel production amounted to almost 1.9 billion tons. At the same time, steel production is responsible for approximately 7% of global energy-related CO2 emissions. Using scrap as a raw material for steel production reduces greenhouse gas emissions substantially: each recycled ton of steel scrap avoids 1.7 tons of CO2, compared to primary steel production. More stringent climate policy around the globe will increase demand for steel scrap. This additional demand is likely to trigger a surge in trade barriers. Proposing new reporting obligations for scrap exports to non-OECD-countries, EU’s planned waste shipment directive foreshadows this development. Thus, evidence-based policy making requires information about the impacts of trade barriers on steel scrap.

Our study aims to develop and apply a gravity model of global steel scrap trade. Incorporating the sector’s particularities, the model is set up study the impact of (potential) trade barriers scrap use, prices, and trade flows. To this end, we compile a unique dataset of global steel scrap trade including both international and domestic flows in monetary and physical units. Based on this data, we estimate a one-sector gravity model and employ it analyze the effects of China’s recent import ban on scrap imports.

We contribute to the literature in international economics a sectoral deep-dive approach into an ecologically significant product. We develop a comprehensive dataset on scrap supply and consumption, prices and trade flows to the literature. We provide evidence on how trade barriers affect global markets for raw materials from recycling. Furthermore, we develop a tailored tool to study future barriers for trade in climate-friendly raw materials.

Authors

Carolin Hundt (Ernst-Abbe-Hochschule Jena (University of Applied Sciences)) – Frank Pothen (Ernst-Abbe-Hochschule Jena (University of Applied Sciences))

Room

Lecture Hall (A-032)