European industry is becoming increasingly vocal regarding the challenges it faces in decarbonising production while remaining competitive, a view supported by a recent think-tank report.
“The European Union needs to urgently create the conditions necessary to accelerate the industrial transformation if it wants to become carbon-neutral by 2050,” said Patrick Graichen, executive director of Agora Energiewende, a German think-tank.
“It has only one investment cycle left to do so,” he added, also pointing out that carbon emissions in the industrial sector merely decreased by 5% between 2010 and 2018.
Agora Energiewende has just published a report on creating demand for climate neutral materials and products – or the barriers to this – in cooperation with the Corporate Leaders Group (CLG) at the University of Cambridge.
“It’s about where the future of the competitiveness of the EU economy and many prosperous businesses lies,” said Eliot Whittington, director of CLG Europe at an event last week (11 May) where political leaders came together with members of the industry and think tanks to discuss how to scale up demand for climate neutral basic materials and products.
The report identified three key barriers to scaling up and reaching carbon neutrality: the missing business case, non-cost barriers to purchasing climate neutral materials, and missing incentives to unlock a full set of decarbonisation levers along the value chain.
“A higher carbon price does not address many of these barriers,” said Graichen, adding that the European Commission is not yet at the speed they need to reach on deploying innovation.
The report also lays out three policy priorities to drive demand for CO2-free virgin materials, recycled materials and material efficiency.
It calls for a reorientation of Ecodesign and public procurement rules to account for embedded CO2 in final products, it prescribes improved data reporting and CO2 performance labels for basic/intermediate products, and early-stage support for recycled/innovative materials.
A package of EU climate and energy laws, due to be presented in July, will help set the course for carbon neutrality and answer the industry’s pleas for direction, said Diederik Samsom, who heads the team of EU Green Deal chief Frans Timmermans.
Among other things, the upcoming “Fit for 55” package will expand carbon trading to new sectors, increase the EU’s renewable energy target, and introduce a carbon charge at the EU’s border to shield industry from unfair foreign competition.
While the European Commission says a border levy is needed to protect EU industry from competitors in foreign countries that do not put a price on carbon emissions, emerging economies like China have expressed concerns.
The industry is currently facing a “prisoner dilemma” around decarbonisation, warned Peter te Kulve from Unilever. This means neither side is ready to make the first step and risk great costs, requiring policy intervention to smooth out the adaptation stage.
“We invite policymakers to create policies favourable to the emergence of climate-neutral materials and products,” te Kulve added.
On an EU-level, policy is needed to harmonise incentives and data across the internal market, according to Claire O’Neill, managing director at the World Business Council for Sustainable Development.
She called for business cooperation and transparency around carbon embedded in products, adding that companies should not wait for global standards before taking action.
But global standards are also needed, said Maria Spyriaki, a Greek MEP who sits on the European Parliament’s energy and industry committee. “We have to put Europe back in the driving seat,” she added.
[Edited by Kira Taylor and Frédéric Simon]