Opinion - 18/February/2019

Towards a climate neutral industrial strategy in Europe

Europe urgently needs an industrial strategy in line with international climate targets, backed by a smart policy framework to help heavy industry decarbonise and remain competitive, says Matilda Axelson from the Institute for European Studies at Vrije Universiteit Brussel

Public sector support, agreeing and implementing a robust policy framework and supplying the necessary funding, is vital to decarbonise heavy industry. The sector cannot, and should not, manage its clean energy transition alone, argues Matilda Axelson from the Institute for European Studies at Vrije Universiteit Brussel 

 

In its recently launched long-term climate strategy, the European Commission, the EU executive body, stresses the need for a competitive, low-carbon heavy industry if Europe is to become climate neutral by 2050. Numerous studies agree this transformation is possible. These industries have reduced their emissions significantly during the past decade, but still directly emit about 15% of Europe’s total greenhouse gas emissions. To massively reduce this figure, and achieve the commitments of the Paris climate agreement, clear action from European policy makers is urgently required.

Most of the technologies needed to green industrial processes are not yet available at commercial scale. New, low-carbon process technologies seem promising in terms of carbon dioxide emission mitigation, but need further development, testing and upscaling before they are market-ready. Innovation of this scale takes time and for industrial sectors with investment cycles of 20 to 30 years, 2050 is only one major investment decision away.

These sectors therefore have a maximum of five to ten years to choose which technological pathway they should pursue if they are to have carbon-neutral production plants up and running by 2050. That means that Europe needs the right policy framework in place in just a few years from now for industry to make informed business and investment decisions to facilitate an industrial low-carbon transition.

 

For industrial sectors with investment cycles of 20 to 30 years, 2050 is only one major investment decision away

 

Larger transformation

Decarbonising energy intensive industries is part of a larger transformation towards a clean energy economy and society in Europe. Heavy industry cannot, and should not, manage this transition alone. The public sector will play a crucial supporting role in creating favourable conditions for low-carbon solutions, new process technologies and innovations that increase material and energy efficiency. Public funding that goes beyond traditional grant models will be needed, such as public-private partnerships and instruments to de-risk low-carbon investments.

Europe’s single market must recognise the value of low-carbon products and support the development of more circular business models. Green public procurement practices can also drive demand and upscale the market size for low-carbon products.

Last, but not least, the industrial transition must be managed on a system level with public sector support. Industry is already demanding access to competitively priced renewable energy. New process technologies will require access to raw materials and feedstock. And administrative support will be needed to facilitate the emergence of low-carbon value chains. Europe will need infrastructure and support to create industrial clusters, where symbiosis between different sectors can thrive. Such clusters are suitable for the cost-effective implementation of carbon capture and storage (CCS), infrastructure for alternative feedstock, such as hydrogen, and circular waste streams.

 

For European industry to remain competitive in the long run, firms must be well prepared to adjust to a changing business environment

 

Business opportunities

A competitive heavy industry is essential for the whole European economy. The industrial low-carbon transition has only just started and will transform traditional value chains on a global level. For European industry to remain competitive in the long run, firms must be well prepared to adjust to a changing business environment.  If this transition is properly managed, it offers the chance for industry to capture arising business opportunities and switch to new, low-carbon business models, while phasing out high-emitting plants that will be obsolete within a few decades. Policy makers must create the right conditions that drive low-carbon innovation and enable the development of circular value chains and make the EU an industrial forerunner on a global scale.

Only through serious and ambitious support from policy makers can energy intensive industries mitigate their emissions and remain competitive. Europe urgently needs an industrial strategy in line with international climate targets, backed by a smart policy framework.

 

FORESIGHT Editor in Chief Philippa Nuttall Jones speaks to Matilda Axelson about how good policies will allow heavy industry to drive a European clean energy economy. Watch the interview here


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