Up to now, each “course” for making industry climate-friendly has come piecemeal. It’s time for a coherent three-course menu.
In December 2019, the European Commission’s European Green Deal Communication talked tough on industry decarbonisation. It called for “a climate neutral and circular economy requir[ing] the full mobilisation of industry” and noted that “[t]o be ready in 2050, decisions and actions need to be taken in the next five years”. This is absolutely true. But there’s a problem: now that we see the legislative package emerging for the Green Deal, the action does not match the words.
Granted, the Commission’s Work Programme for 2021 includes some elements to enable clean industrial investment. There is a very ambitious Hydrogen Strategy; the consultation on the EU ETS reform considers the option of Carbon Contracts for Difference to support the deployment of breakthrough technologies; and higher carbon prices, if coupled with strong anti-leakage measures, will also help.
Nevertheless, vital elements identified by the Green Deal Communication are not featured at all. For example, decarbonising industry will require massively expanding access to clean, affordable energy sources. Think: nearly ubiquitous direct electrification, biomass as a chemical feedstock, bioenergy coupled with carbon capture and storage for cement production, etc. However, such considerations have no clear place in the Commission’s Work Programme, which only mentions hydrogen.
Similarly, the Green Deal Communication identifies the urgent need to create lead markets for low-carbon basic materials, such as cement, steel and bulk chemicals. However, the most obvious options for doing so do not appear to be part of the Sustainable Products Initiative (SPI):
- minimum environmental public procurement requirements,
- standardised CO2 performance labels for basic materials,
- mandatory embedded CO2 requirements for final products like buildings and vehicles, etc.
Under the current work program, the European legislator takes up industry elements piecemeal – not holistically – as supportive efforts in disparate policy initiatives that do not actually focus on industry decarbonisation. Parliament and the Council must instead identify the role each tool has in the toolbox of European industry decarbonizing. In short, a clear and coordinated vision of the “clean industrial policy package” is lacking.
A holistic approach would not just be better; it’s also what the European Council implicitly tasked the Commission to do when adopting the 55% target: “propose measures that enable energy intensive industries to develop and deploy new climate neutral technologies while maintaining their industrial competitiveness”.
According to the Commission’s own Impact Assessment on the 2030 Climate Plan, about 142Mt (or 27%) of energy-intensive industry emissions in 2019 will need to be abated by 2030. Agora’s analysis shows that this abatement can be achieved with a portfolio of relatively mature breakthrough technologies. To kick-start these investments at scale, the EU must establish a coherent policy framework before 2030 if European industry is to stay ahead in international markets. For once, Industry groups, labour organisations, think tanks and NGOs tend to agree on what needs to happen : a comprehensive package of dedicated clean industry measures is urgently needed under 2030 climate legislation.
So how can this be fixed?
In March 2021, the EU’s industrial strategy is to be updated in order to implement the European Council’s mandate. Instead of cobbling together items à la carte, the Commission must use this overarching strategy document to put together a coherent three-course menu.
First, it must provide a compelling narrative for how Europe’s energy-intensive industry can become climate-neutral competitively. The narrative must address five issues:
- Expanded access to affordable clean energy and related infrastructure;
- Deployment of key low-carbon and circular materials technologies;
- Lead markets for low-carbon intermediate products;
- Circular, resource-efficient product design; and
- Governance and coordination of the clean industry transition.
Second, it must set clear, ambitious milestones. In particular, we would recommend the following milestones be set for 2030:
- In the steel sector, the EU should set a goal that at least 40 Mt of primary steel produced from “climate neutrality-compatible” technologies by 2030.
- In the cement sector, at least 16Mt of EU cement production should be linked to offshore carbon capture and storage.
- In the chemicals sector, the EU should see a portfolio of large-scale demonstrators for innovative biomass-to-chemicals technology developed.
- For the circular economy for basic materials, it is essential that innovative recycling technologies are established for chemicals and cement, which are critical for achieving the 2050 climate neutrality goal for industry. (Specifically: 2Mt HVC (5%) of chemical recycling, and 15% of end-of-life cement recycled into new cement applications”)
- To electrify low-temperature industrial heat, the EU should aim for at least 50% industrial steam demand at up to 200°C supplied by power-to-heat technologies by 2030.
Third, the new industrial strategy must highlight specific legislative instruments to develop a robust, ambitious EU framework for clean industry. In particular, key issues like clean energy, CCS infrastructure planning, and lead markets for low-carbon and circular products must find their place in the Commission’s Work Programme.
Of course, recipes matter as well – and that’s what Agora is working on. Further details on how this could be done are explained in the short study below.
All posts by Matthias Buck, Dr. Oliver Sartor
An ETS for transport and buildings is essentialAn EU-wide emissions trading system for the transport and building sectors would secure the financing of low-carbon solutions and support lower-income households and member states through the redistribution of carbon pricing revenues.
Industry decarbonization can no longer be done à la carteUp to now, each “course” for making industry climate-friendly has come piecemeal. It’s time for a coherent three-course menu.
Projects for the topic
A Clean Industry Package for Europe
The European industry has the technological solutions at hand to support the EU in raising its 2030 climate targets and reach climate neutrality by 2050. What’s needed now is a strong policy framework to kick-start investments in [...]
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