Navigating the Transition to Green Steel under Constraints: The Interplay Between Industrial Policy and Corporate Strategies in Germany

The European Union's green hydrogen strategy represents an ambitious attempt to align decarbonization with industrial competitiveness, with Germany's steel sector serving as a critical test case. This study examines how major German steel producers navigate the transition to hydrogen-based steelmaking, focusing on four systemic challenges inherent to industrial transformations: high upfront investments in technology and infrastructure, elevated production costs and consequent lack of competitiveness (at least during scaling), demand-side uncertainties for green steel, and vertical and horizontal coordination failures across hydrogen supply chains. Preliminary observations from steel companies in Germany reveal significant variation in transition trajectories. Some firms are forming strategic partnerships to secure hydrogen supplies and financ-ing, while others delay investments amid uncertainty about policy support and market conditions. These differences suggest several key questions for investigation: To what extent do current policy instruments adequately address the four systemic challenges? How do conflicting competencies across governance levels constrain effective industrial policy? How do firms' varying adaptive strategies reflect different capacities to navigate governance constraints? What do these patterns reveal about potential gaps in Germany, embedded in the constraints of the EU's single market governnce, ability to push complex industrial transformations?