Metal, steel industries warn EU efficiency laws could force them out of Europe

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This article is part of our special report Resource Efficiency.

SPECIAL REPORT / Steelmakers and other metals industries fear that limits the EU is considering imposing on the amount of natural resources they use will push them out of Europe, where environmental regulations are less stringent.

The European Commission plans to decouple economic growth from natural resource use may sound like common sense.

Companies that use less energy, water or land generate less waste per unit of revenue and tend to produce higher investment returns than others, according to a recent study published in the Harvard Business Review.

The Commission's Roadmap to a Resource Efficient Europe, adopted in September 2011, suggested introducing indicators and targets across the 27-nation bloc.

Although the targets are not obligatory for the private sector, like CO2 emissions targets, the Commission believes that measuring performance will be sufficient to drive the transition to a resource-efficient economy.

William Neale, in charge of resource efficiency at the European Commission, says that indicators give a "clear signal" to industries where they need to invest in order to make it easier to shift to an economy where growth is de-coupled from resource use.

“If we say this is the way things are going then, companies, investors, funds and so on can start seeing that that is the writing on the wall,” Neale told EURACTIV in an interview.

Yet the cost could be high for private companies, with resource-efficiency improvements often requiring substantial initial costs and a lengthy return on investment.

Energy intensive companies: 'We would relocate abroad'

Heavy industries that use a lot of energy, like the metal and steelmaking sectors, have come to symbolise those concerns.

They fear that natural resource use indicators will be a stepping stone towards stricter regulations that will hurt their competitiveness in an already tough international environment.

As a result, some have warned they could be forced to close down factories and relocate abroad.

Metals Pro Climate, a group of leading companies in the non-ferrous metals industry, says resource efficiency indicators "may be misleading".

Indicators, it argues, "could lead to policies that would imply that energy-intensive companies would relocate abroad." At the end of the day, "Europe would merely increase its import of metal sheets, instead of metal ores," the group said in a statement.

The steel industry is also concerned about resource-efficiency targets, arguing that steel is needed for renewable and energy efficiency solutions that are expected to drive future demand.

"Steel will be a part of a sustainable future," said Eurofer, the European steel association, indicating that the metal is widely used in manufacturing wind turbines or lighter cars that consume less energy.

"But will it be produced in or outside Europe?" it asked.

For Oliver Bell, president of Eurometaux, the European association for the non-ferrous metal industry, setting targets will definitely not help. In a global economy, bureaucratic legislation can hurt European industry, he told EURACTIV.

"The resource efficiency indicators currently under discussion are mainly based on quantities of raw materials in relation to the gross domestic product – for example DMC," Bell said, using an acronym for domestic material consumption.

"Unfortunately these indicators worsen if the gross domestic product decreases, e.g., due to economic downturn, while the use of raw material stays the same. If these kinds of indicators drive policy, it could imply that energy intensive companies relocate abroad."

Veronique Steukers of the Nickel Institute agreed. "One needs to understand the global nature of resource efficiency," she said. "We are competing at an international scale. Prices are set globally". And companies are already motivated to use raw materials in an efficient way in order to compete on the international market, she argued.

Similarly, Patrick de Schrynmakers, of the European Aluminium Association, said that the EU must be “careful” when drawing legislation. Setting taxes on resources in Europe will encourage imports instead of local production, de Schrynmakers warned, with potential unintended consequences on global greenhouse gas emissions.

“It's important to think in terms of global life cycle. If we are going to import more metals, instead of recycling them here in the EU, then GHG emissions will increase,” de Schrynmakers said. Exports of scrap aluminium, he added, "should be considered as European electricity export without compensation."

'Killing industry with kindness'

The European Commission says it understands the industry's concerns but argues that the transition to a leaner economy is inevitable.

"It’s going to happen anyway because resources are under increasing pressure," said the Commission's Neale. "We have the 9 billion population predictions, 3 billion new middle class consumers by 2030. Which is wonderful… it’s new markets, new consumers and so on, but it will put a new pressure on resources which means we need to undergo this transition."

By setting indicators, Neale contends the Commission is only trying to make the transition smoother and avoid a hard landing for European industries which have seen the price of commodities booming in recent years.

Taking the German manufacturing sector as an example, Neale pointed out that materials alone represent about 40% of the sector's input costs. "That’s twice what they pay for labour. So of course if material prices are going up, it’s obvious business sense for them to use the resources better."

"We can’t help industry by saying we can just carry on the way we want to carry on. That’s really just killing industry by kindness," Neale told EURACTIV in an interview.

'Creative destruction'

But Neale also acknowledged that the transition to a resource-efficient economy will come at a cost.

"It involves pain. It’s creative destruction. You will have certain sectors and industries which will gain, and others which will lose."

In the European Parliament, influential lawmakers have tried to assuage fears expressed by heavy industries.

"I can understand industry's fears but they are ungrounded," said German Social-Democrat MEP Jo Leinen, who works on environmental issues at the European Parliament.

"We are very well aware of it. In the Resource Efficiency Platform, we have a close dialogue with industry and other stakeholders," said Leinen, assuring companies that the EU will not set rules that will force European industry to move abroad.

"On the contrary, we want to create a framework which will help industry to improve their performance and become more resource efficient,” Leinen said.

The German MEP referred to earlier EU debates on climate and energy legislation to make his point. "industry was afraid the climate and energy package would make them move their business abroad and instead the EU has become a main global player in green and climate-friendly technologies," Leinen said.

"The same should apply for resource efficient products and practices," he added.

Rio+20 and global initiatives faltering

As metal and steel industries point out, the debate on resource efficiency has to be seen in global context.

But getting countries to agree on a common international approach is no easy task.

Environment Commissioner Janez Poto?nik presented the EU's resource-efficiency roadmap at this year's Rio+20 United Nations summit. In Rio, the EU and other countries – including Japan, Korea, the United States and China – unanimously promoted "smart, inclusive and sustainable growth" by supporting a more resource-efficient, greener and competitive world economy.

But the outcome of the negotiations made these aims seem more like wishful thinking, with emerging economies fearing that green targets would put brakes to their economic growth.

Rio+20 produced no major agreement and the 100 leaders attending signed off on a conference document – The Future We Want – that was negotiated in advance and was seen by environmentalists as toothless.

EU focus on recycling and re-use

While getting all countries in the world to agree on resource-efficiency laws might prove a daunting task, Europe is being urged to lead the way by becoming a leader in recycling and re-use.

As Europe's raw materials are getting scarcer, consumers and industries continue to let them go to waste.

Richard Seeber, a German Christian-Democrat lawmaker in the European Parliament, says easing the recycling phase of products could make a huge difference in Europe.

"The EU is in need of a mind shift,” Seeber said. “Our waste is sometimes even being shipped to other countries, such as China or Africa, where it is in some cases properly recycled, re-used, and even resold. This is absurd – we must improve the productivity in our recycling process!”

But recycling and re-use models are not the only solution. Products need to be efficient throughout their entire life-cycle, starting from their design phase.

The EU's Ecodesign directive could play an important role here, as it could set rules for easing the dismantling of used products, which could be then easily recycled in Europe.

“We cannot allow other countries to re-use our resources at our expense,” Seeber said.

Umicore, a Belgian-based company which has emerged as a global leader in waste recovery and recycling, could not agree more.

"We believe that moving towards a resource efficient society should be seen as an opportunity. Recycling is not only one of the cornerstones to achieve a circular economy, it also allows for access to valuable and critical raw materials and the creation of growth and employment in the EU," it said in a statetment.

The European Commission unveiled its Roadmap to a Resource Efficient Europe in September 2011, recommending the introduction of resource-efficiency indicators and targets across the 27-nation bloc.

The Commission launched in June 2012 a Resource Efficiency Platform in a bid to set new standards for resource efficiency in the EU. The platform has been divided into three working groups:

  • Circular economy;
  • Setting objectives and measuring progress;
  • Framework conditions for investment in resource efficiency.

The next meeting of the platform, on 14 December, will focus mainly on discussing and possibly drawing up a set of indicators and targets for these three groups.

  • By 2014: Commission to revise the 2020 recycling targets set in the Waste Framework Directive
  • Summer 2013: Resource Efficiency Platform expected to issue a first set of recommendations for short-term measures that can be adopted in about 12 months
  • by 2014: Commission to revise 2020 recycling targets set in the Waste Framework Directive
  • Mid-2014: Mandate ends, the platform makes recommendations for the longer term

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