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Format
Impulse
Date
28 October 2020

A clean industry package for the EU

Making sure the European Green Deal kick-starts the transition to climate-neutral industry

A Clean Industry Package for the EU

Preface

To align with the Paris Climate Agreement, the European Commission has recommended that the European Union reduce emissions by 55% by 2030 (relative to 1990 levels) and achieve climate neutrality by 2050. To achieve these goals, the EU and its member states must redouble their efforts to support the greening of the industrial sector, especially its energyintensive sub-branches, such as cement, steel and chemicals.

Industry accounts for approximately 20% of the EU’s net annual CO2 emissions. In the 2020s, a large portion of Europe’s industrial installations will be up for major reinvestment decisions. Since these are investments in very long-lived capital assets, the EU must make the most of the opportunity if it is to have a serious chance of achieving climate neutrality by 2050.

Capitalizing on the opportunity will require urgent action by member states and by the EU as a whole. As explained in this report, the EU will need to devise a comprehensive “clean industry package” to unlock transformative investments in the upstream, midstream and downstream segments of the industrial value chain while providing a level playing field for European industrials with respect to foreign competition.

Key findings

  1. By 2030, between 30 and 53% of cement, steel and steam cracker plants in the EU27 will require major reinvestments.

    Based on existing policies, there is no credible business case to make investments that are compatible with climate neutrality by 2050. As a result, the EU faces a serious risk either of plant closures and job losses or the lock-in of CO2-intensive technologies.

  2. EU ETS carbon prices and a carbon border adjustment will not be enough to create a business case for key low-carbon technologies before 2030.

    Many “breakthrough” technologies will require carbon prices on the order of 100 to 170 €/tCO2 if they are to be competitive. To make these technologies economically viable, supplementary policies such as carbon contracts-for-difference will be needed.

  3. In 2021, the Commission needs to propose a clean industry package of genuinely transformative policies, unlocking investments in the upstream, midstream and downstream segments of the value chain.

    The package should include carbon contracts for difference; planning and financing tools for clean-hydrogen infrastructure in industrial clusters; free ETS certificates and protection against carbon leakage; and standards to create markets for climate-neutral and circular products.

  4. Europe must begin to transform its industrial sector even before EU legislation is passed.

    Member states can accelerate economic recovery in the short term by supporting investments in industrial decarbonisation. With comprehensive clean-industry legislation, the EU can drive investment in lowcarbon transformation and create economic resilience in the medium term.

Bibliographical data

Authors
Oliver Sartor, Wido Witecka, Philipp Hauser
Publication number
194/07-I-2020/EN
Version number
1.0
Publication date

28 October 2020

Pages
42
Suggested Citation
Agora Energiewende (2020): A Clean Industry Package for the EU: Making sure the European Green Deal kick-starts the transition to climate-neutral industry
Project
This publication was produced within the framework of the project A Clean Industry Package for Europe.

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