The power to change: The deepening climate crisis has provoked an ambitious commitment to a European Green Deal and a sustainable energy transition across all aspects of the European economy. The role of climate-neutral industrial production and goods transport is crucial for achieving these targets: Electrification alone will not cover the rising demand for clean energy in industry, and no single alternative has yet emerged to replace fossil fuels. How should the EU empower the research and adoption of new digital and energy-efficient technologies to enable a climate-neutral future for European industry?
ITRE
Committee on Industry, Research and Energy (ITRE)
Written by:
Viktor Salenius (FI)
Topic at a Glance
The EU and its Member States have become global forerunners in setting ambitious targets for mitigating climate change in industrialised and heavily fossil-fuel powered economies. The pathway to reaching the targets is still unclear in many sectors. The key challenge currently facing Europe’s industry is how to navigate and manage this change in a fair and effective way, at different levels of European decision-making.
Context
The green transition in European industry entails a wide variety of interconnected dimensions: The need to switch to carbon-neutral energy, electricity, transport fuels, minerals and other base materials, as well as the need to achieve more efficient and circular material flows, material refinement processes, and manufacturing supply-chains.
The first steps of the green transition have already been set out. Industrial processes account for around 20% of all European greenhouse gas (GHG) emissions. The needed technologies have already been invented that make possible a full transition of European industry into sustainable and carbon-neutral processes and resources. Europe hosts world-leading hubs for learning, research and development in many key industry sectors, and promising discoveries and large investments are continuously being made both at universities, public laboratories and private companies. For example, stakeholders in the mining and steel industries are preparing fully fossil-free and carbon neutral material flows to industry. Many industrial centres have created collaborative networks for a fully circular value-chain, in which the majority of all used resources are directly recycled back into production after their use.
However, the plan remains unclear despite having the tools. Usually, industry-firms buy and implement new solutions when it is clear which ones will become so-called dominant designs, i.e. the most widely used. The worsening climate crisis means that there may not be time to wait for the dominant-design formation to become the primary driver of Europe’s industrial transition. For example, almost 95% of the European transport sector still relies on oil, and many stakeholders hesitate to invest in redesigned industry transport based on electric battery cells, biofuels, and hydrogen vehicles, because these emerging technologies are still viewed as insecure investments.
Relevant Policy Measures and Legal Framework
In terms of financing research and policy implementation for the green transition, the European Green Deal (EGD) framework was launched in 2019 by the European Commission. With the overarching aim of a carbon-neutral EU economy by 2050, the EGD pledges to mobilise €1 trillion in sustainable investments combined from different EU research and development funds. The EU’s pandemic recovery plan also includes several actions on clean transport and industry, such as support for wider deployment of alternative fuel technologies and renewable energy, and kick-starting a clean hydrogen economy in Europe.
The new EU Industrial Strategy was launched in 2020 and builds on three pillars: The green transition, the digital transition, and leveraging the competitiveness of the Single Market to set global industry standards. The efforts towards carbon-neutrality and digital advancement are sometimes known jointly as the Twin Transition, as they can complement each other in modernising the industry. This can happen, for example, by making electricity grids more smart and efficient in meeting electricity demand where and when it is needed. The regulations and support schemes included in the Industrial Strategy include measures to modernise and decarbonise electricity grids, energy-intensive manufacturing, and industrial transport networks.
Apart from coordinating policy strategies, European institutions also host a variety of stakeholder engagement forums, aimed at facilitating collaboration and joint initiatives among both private and public-sector actors in different industry domains. In addition to the European-level frameworks on green industrial transition, there are also several prominent national, regional and local level initiatives and strategies which are already well underway.
In order to boost the clean energy and industry transition, legislative efforts at the European level have been included and amended as part of the EGD and the Clean energy for all Europeans package. The efforts are based on several main directives: the Industrial Emissions Directive that sets binding targets on industry pollution levels, the Energy Efficiency Directive that sets binding energy efficiency targets, the recast Renewable Energy Directive that sets binding targets on the required share of renewable energy sources in comparison with fossil fuels, and the Regulation on the Governance of the Energy Union and Climate Action that details the roles and responsibilities of Member States in implementing climate-neutral policies. Within the transport and mobility sectors, equivalent efforts fall under the European Strategy for Low-Emission Transport, which frames the EU’s priority areas toward sustainable mobility and logistics: Increasing the efficiency of transport systems; speeding up the widespread deployment of carbon-neutral fuels; and supporting the transition to zero-emission vehicles.
In theory, European public stakeholders seek to uphold technology neutrality and support all promising innovations equally in policy and legislation until market forces and investments have created a new dominant design. A good example of this issue is what should replace fossil fuels. In practice, however, the urgency to reduce emissions is pushing policymakers to make stronger regulation and investment decisions, which has raised criticism about excessive market intervention.
Topic Analysis
National
National policymakers face many challenges and political pressures in trying to shape industry, consumer and labour market trends around the green industrial transition. On the one hand, politicians are pressured to prioritise the overall competitiveness of the economy in relation to other countries, to balance the state budget, and to keep unemployment figures low. On the other hand, there should be even more ambitious focus on both binding and voluntary targets for shifting to carbon-neutral energy and industry. Recent UK government policies provide an example of these tensions: On the one hand, commitments to phase out fossil fuels and transition into a carbon-neutral industry. On the other hand, the recent decision to open a new deep coal mine for the first time in decades.
A particularly crucial role of the national policymakers is to oversee a fair and sustainable transition of network infrastructures, such as transport networks, electricity grids, and energy supply. Relying on carbon-free electricity alone cannot cover all of the energy demand in industry, such as the power needed to run energy-intensive processing factories. Individuals and corporations may only make a difference and come up with their own initiatives if business, investment and education opportunities are made available for them. This could be done through means such as tax incentives, low-emission transport zones, grants for shifting to carbon-neutral fuels and vehicles, and limits on fossil resource extraction.
Another key role for national actors is to enable innovative and sustainable industry hubs, through supporting education and science institutions, research and development agencies, start-up ecosystems, and the building of local and regional industry networks.
Further Research and Questions
While the grand challenge facing European industry is to mitigate the deepening climate crisis, the effects of a green transition can also have significant societal and economic benefits. In fact, recent calculations on recovery trajectories from the pandemic recession show that investing in low-emission sectors and initiatives will lead to more new jobs than conventional stimulus measures. Leveraging this to succeed in the green industrial transition is a significant opportunity throughout Europe. Thisrequires stakeholders to come to terms with very unsettled and uncertain environmental, political, social, economic and legal conditions.
Questions to consider
- How should EU stakeholders prioritise available regional and industry development funding during the post-pandemic recovery process?
- What future energy technologies should be supported by stakeholders at different levels through regulations, projects, and research funding?
- How should digitalisation be leveraged in the green industrial transition?
- How can private companies safely make long-term sustainability investments, even where a dominant design technology has not yet emerged?
- How can citizens and local communities take action and be supported in promoting sustainable industry networks and a safeguarded future for local workers?
