The future of Europe’s metals industry will be an early indicator of whether the EU has succeeded in uniting its Green New Deal and Industrial Strategy, write Tomas Wyns and Gauri Khandekar.
In the immense challenge of reducing Europe’s greenhouse gas emissions to zero by 2050, there is one industry that emerges as the real pathfinder of the way forward: Europe’s non-ferrous metals industry.
A European industrial base for metals is a strategic necessity given their essential role in virtually all climate technologies. In our new report released this month, we explore the sector in detail.
We find that Europe’s metals industry is a “bellwether” for the transition of European energy-intensive industries. It shows the direction of travel required, having made huge advances towards decarbonisation through its high levels of electrification, circularity and emissions reduction. Those are key steps that every other industrial sector will have to follow in the next three decades.
The metals industry – a climate frontrunner
Europe’s non-ferrous metals industry has reduced its emissions by 61% since 1990, an amount matched only by the chemicals industry. But what really sets the sector apart is its high levels of electrification and circularity.
Metals producers are by far the most electrified of the ‘energy-intensive’ industries, with 58% of their energy needs coming from electricity. That means the sector’s greenhouse gas emissions can theoretically be reduced by 81% in a decarbonised power system (compared to 1990 levels).
That’s already a major step towards the EU’s 2050 objectives, and one which should then be backed up by further innovations capable of tackling the remaining 19%.
The sector’s lifecycle carbon footprint is further mitigated by its high levels of circularity. More than half of all the metals produced in Europe come from recycled sources, compared with 18% worldwide. We expect those volumes to increase significantly as more metals scrap becomes available in Europe.
Why metals matter for Europe
Metals are essential to nearly all technologies needed for Europe’s climate transition. Their demand will soar in the very near future, with the World Bank predicting a 200% global increase for metals in wind turbines by 2050, 300% in solar panels, and 1000% in batteries.
Global competition for supplying these metals is therefore very high. In the last decade, China has emerged as the leading industrial power, now producing between 30% and 54% of all the world’s base metals after a programme of state support and subsidisation.
European producers must compete against these unfairly subsidised Chinese products, which can be up to eight times more CO2 intensive due to China’s coal-fired grid.
The EU must avoid a situation where its metals production is increasingly replaced by imports with a high carbon footprint, to the detriment of its climate goals.
Early challenges for climate frontrunners
The metals industry’s high electrification also makes it five times more sensitive to rising electricity prices than other industries. That means they will be the most susceptible to higher costs and lower grid stability resulting from Europe’s decarbonising power system.
If Europe fails to develop an affordable and stable supply of carbon-free electricity in the next decades, it risks watching its metals business shift abroad, despite the high climate potential.
That’s a central reason why we’re convinced the non-ferrous metals industry will be a major indicator for others. If there is no pathway to competitive zero-carbon electricity pricing, we don’t think climate-neutrality will happen overall. Other sectors like steel and chemicals will not go in the metals industry’s direction, because higher electricity prices will prevent investments in electrification of their processes.
Next steps for Europe’s industrial transition
The EU and its Member States now need to unite behind a Green Deal which embeds a robust industrial strategy to ensure the successful transition of its basic materials industries and related value chains. Our report outlines five priority actions for making Europe climate-neutral by 2050 while maintaining jobs and investment:
- ensure competitively priced zero carbon electricity;
- support innovation and investment in breakthrough mitigation technologies;
- nurture value chains essential for climate transition and ensure industrial symbiosis;
- implement an ambitious circular economy policy; and
- pursue an assertive trade and competition policy.
With the right industrial policies in place, the European metals industry can be an essential partner in making a success of Europe’s Green Deal. Just as important, its prosperity will provide a vital signal to other energy-intensive industries that the climate transition and industrial competitiveness and leadership can go hand in hand.