Balancing environmental and financial performance in hard-to-abate industries: Pathways for low-carbon hydrogen adoption

Purpose: The purpose of this study is to show how the adoption of emission-reducing but cost-inferior technologies/fuels, e.g. hydrogen, may be justified. Contributing to the debates about financial viability and acceptability of low-carbon solutions, the authors suggest an opportunity cost-based framework for corporate governance in energy-intensive industries. Design/methodology/approach: The study analyses production processes heavily dependent on fossil fuels and the trade-off between environmental and financial performance. Considering emission constraints, the authors derive the relationship between output price, emission parameters and input fuel prices suggesting the acceptable conditions to deploy low-emission technologies, which are used to define hydrogen demand and sustainable corporate strategies. Findings: The demand for hydrogen or other low-emission solutions emerges as a function of a variety of exogenous parameters and firm’s choices. It implies that decisions on emission targets or environmental stewardship are intertwined with procurement choices, shareholder/customer preferences and other corporate governance decisions defining the pace of net-zero transition. Practical implications: The willingness to invest in clean technologies is interpreted within development strategies, highlighting conditions and sectors where hard-to-abate industries are likely to adopt net-zero solutions. Numerical simulations provide insights into how companies can optimize the balance between financial and environmental performance and identify suitable market environments that facilitate this transition. Originality/value: This paper presents an innovative perspective on the factors underpinning adoption of low-emission technologies. Using insights from numerical simulations, the study elucidates the corporate strategy implications, providing market-driven analysis of the pathways for industrial decarbonization.