Decarbonizing Industries Requires a Policy Reframing Approach

Author: Tatiana Mindekova

• The climate agenda in the EU gained traction in recent years.
• This agenda includes a wide range of policies and targets aimed at lowering greenhouse gas emissions while supporting economic growth.
• Encompassing a multitude of problem areas, climate policies have been grappling with setting clear priorities and roadmaps.
• Although the number of areas that are covered by the EU’s policies has been growing, their representation is not equal.
• Media and public attention concentrate on select issues such as energy systems and transportation.
• The complexity of industry decarbonization has been largely neglected and this led to discrepancies between the climate- and industry-orientated strategies.

Looking for energy-intensive decarbonization

Past EU strategies failed to put forward a strong commitment to industrial decarbonisation. And the newer ones did little to address this shortcoming. The Low-Carbon Roadmap from 2011 set out to improve energy efficiency, pilot Carbon Capture and Storage projects and bolster biomass use. The other options for decarbonization, such as electrification, renewable synthetic energy sources, ambitious recycling management, material efficiency and innovative manufacturing processes, were added only in 2018 when the EU unveiled its long-term strategy dubbed as A Clean Planet for all.

The missing link remained the energy-intensive industries overhaul as the strategy did not spell out emission reduction targets. The hard-to-abate sectors also continued to benefit from free emissions allowances echoing competitiveness and carbon leakage concerns. Moreover, while these strategies mention energy-intensive sectors, they do not suggest any distinctive approach to their decarbonization. Rather, both strategies rely on technological improvements and Carbon Capture and Storage as the preferred ways of decarbonization. Such superficial approach towards the decarbonization of industry is also mirrored in the numbers of emissions from industry, which have been stagnating since 2012 and were only decreased during the economic downturn caused by the COVID pandemic.

In 2020, The European Commission introduced A New Industrial Strategy for Europe which sets out the EU industrial vision and takes into consideration the EU’s goal of becoming the world’s first climate-neutral continent by 2050. The strategy indeed means a turning point as it ushered in bolder emissions reduction than before. Moreover, the ‘key role’ of the energy-intensive industries in the decarbonization process is acknowledged. In the following communications from the European Commission, energy-intensive industries were also distinguished as a separate industrial ecosystem, in order to enable specific policy responses.

Has the moment of reckoning finally reached the energy-intensive industries?

The overall picture is not as rosy though. The industries at risk of relocating their production outside of the EU (including hard-to-abate industries) continue to receive free emissions allowances and will do so in the next decade. Although other policy tools, such as Carbon Border Adjustment Mechanism, are meanwhile being rolled out, the sense of urgent action to decarbonize energy-intensive industries is still lacking. The current policy design, therefore, signal a conflicting approach toward the decarbonization of energy-intensive industries.

While paying attention to the issues of competitiveness and technological readiness in the decarbonization process of industries is essential, the EU’s climate aspirations will not be fulfilled without a stronger commitment and attention to the hard-to-decarbonize industries. Moreover, due to the specifics of these industries such as long investments cycles and lack of technological solutions, the process of decarbonizing these sectors is expected to be longer. For these reasons, more attention from academia as well as the media should be paid to this process, in order to speed up and support the technological improvements. From the policy improvements perspective, the conflicting issues between climate and industry strategies need to be resolved, to enable sending of a clear signal that the time to act in energy-intensive industry decarbonization is now.