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 seldom recognized 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. [Display omitted] •Spatial economic framework quantifying the gross value added of hydrogen investments•Low carbon hydrogen is used to decarbonize industrial sectors in the EU and in the UK•The framework accounts for existing regional economic interdependencies•UK investments in the North West and Humberside have the highest leveling up value Energy resources; Energy policy; Energy sustainability; Economics