EU eyes softer climate policies to fuel ‘industrial renaissance’

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This article is part of our special report Industrial Renaissance.

As Europe starts to emerge from its worst recession since the Second World War, policymakers are reconsidering the EU’s global leadership on climate change for fear that it might hinder the fledgling recovery.

Inspired by France and Germany, which are seeking ways to re-start European manufacturing to fuel a new generation of jobs, the talk in Brussels is now all about re-balancing business and environmental objectives.

“Several member states pointed to the need for a more balanced approach between the EU’s industrial, energy and climate policies,” stated the EU’s 28 industry ministers after a meeting of the Competitiveness Council in Brussels last week (20-21 February).

Policymakers should take “a systematic consideration of competitiveness concerns across all policy areas,” said the ministers, who were preparing for a discussion on industrial policy among the European heads of states and governments later in March.

Antonio Tajani, the EU commissioner in charge of industry and enterprise, has taken several initiatives over the past years to tackle Europe’s industrial decline. In a new policy strategy unveiled in October 2012, he declared the aim to raise industrial activity to 20% of EU gross domestic product by 2020, compared to 16% today, taking it back to pre-crisis levels.

>> Read: Commission seeks ‘new industrial revolution’

According to the Italian commissioner, those initiatives are starting to pay off politically, with a growing realisation that manufacturing activity in Europe also generates investments and jobs in other sectors, including services.

Political climate is ‘totally different’

For industry ministers, this means environmental policies such as climate change need to be considered in a broader context, which also looks at their impact on industrial activity.

“The political climate is totally different” today than it was before the financial crisis erupted in 2008, said Kostis Hatzidakis, the Greek minister for development and competitiveness who chaired last week’s ministerial meeting.

“There is a shift towards industrial policy,” Hatzidakis added. “I think all of us have realised the mistakes committed in the past.”

Underlining this new approach, Tajani said the European Commission’s industrial renaissance strategy, unveiled in January, for the first time looked at energy policy, climate change, and shale gas “altogether” in a single package, putting them on equal footing.

“It’s important to have an achievable target for our companies,” he added, referring to the EU’s proposed new climate and energy objectives for 2030.

Music to the ears of business

The ministerial statement is music to the ears of employer association BusinessEurope, which has long been pushing for the EU to reconsider its “unilateral” stance on climate change.

Business groups have long complained about the EU’s 2020 climate policy, which commits European manufacturers to reduce carbon dioxide emissions by 20% by the end of the decade. Competitors in Asia or the US have no such commitments, warns BusinessEurope, making investments in Europe less attractive.

In a letter to the industry ministers last week, BusinessEurope called for an industrial policy that “truly puts cost-competitiveness, security of supply and climate objectives on an equal footing” and prevents “investment leakage”, whereby companies locate new factories outside of Europe where the environmental constraints are lower.

On climate change, BusinessEurope said it supports a greenhouse gas emissions target for 2030, but says this “can only be realistic if a binding international climate agreement can be concluded in 2015”.

“We have to make sure that Europe is not once again a lone frontrunner without followers,” the employer’s group stressed.

Environmentalists cry foul

For environmentalists, Europe’s renewed focus on competitiveness sounds like a direct attack on green policies.

Brook Riley, an activist at Friends of the Earth, says he is worried that “industry” has won the argument over 2030 targets, which were unveiled on 22 January, alsongside Tajani’s action plan for a European industrial renaissance.

“There is a similarity of language between what BusinessEurope says on rebalancing climate change” and the messages being given by the Commission and EU member states, Riley told EURACTIV. “They are using the same rhetoric so in itself that is worrying.”

“I think it’s balancing far too much one side over the other.”

The 2030 proposal set out objectives for Europe to cut carbon dioxide emissions by 40% below 1990 levels and ramp up renewable energies to 27% of the bloc’s total energy use.

But according to Riley, these objectives have been weakened in the 2030 proposal, especially on renewable energies, because individual countries are no longer requested to meet national objectives, unlike in the current 2020 agenda.

“The 20% [CO2 reduction] target is secured, there is no discussion about touching that,” Riley said. However, he expressed concern that weaker targets for 2030 will send the wrong message to member states over the long-term and weaken the 2020 objective as well.

On renewables, he said: “Now, we’re moving back from national targets to an EU-level target which nobody has any idea how to make anyone accountable for in practice. Seeing the Commission is rowing back for the years after 2020 means that you will almost inevitably take your 2030 objectives much less seriously,” Riley argued.

Final decision with the member states

Asked whether national industry ministers were supportive of proposed 2030 targets on renewable energy and CO2 emission cuts, Tajani remained elusive, saying the final decision was in the hands of the member states.

He expressed confidence however, that both climate and industrial policies could be met at the same time.

“This is the political message – it is possible to have an industrial policy with strong engagement against climate change through good work on energy policy,” Tajani said.

To critics, the Commission’s attempt at reconciling climate and re-industrialisation goals bears testimony to its indecision on industrial policy, which also reflects infighting between Commission departments pulling in opposite directions.

Internal divisions at the Commission were laid bare just one week after the EU executive unveiled its 2030 package when the EU’s energy commissioner, Günther Oettinger, spoke out against the planned 40% CO2 objective, saying that those who expected the cut to “save the world” were either “arrogant or stupid”.

“I have to be constructive as I’m a member of the team but I’m sceptical,” he told an ‘Industry Matters’ conference organised by BusinessEurope.

>> Read: Oettinger rallies opposition to 2030 CO2 target

Kostis Hatzidakis, the Greek minister who was chairing last week’s industry ministers’ meeting, added fuel to criticism that the Commission was divided on the matter.

The European Commission should avoid a “fragmented approach” to industrial policy, he said, adding that Tajani’s initiatives were “valuable” but insufficient.

“We have some actions concerning industry, some other actions concerning energy, some other actions concerning environment – they have to be coherent, they have to be coordinated in order to have added value,” Hatzidakis said.

Tajani seemed to acknowledge coordination problems at the Commission, saying there had been “a long debate” on re-industrialisation and that the EU now had to go “from theory to action”.

“We don’t believe miracles can occur in six month,” Hatzidakis concurred, saying the Greek presidency hoped to “lay the foundations for the next European Commission” to go “from theory into action”.

The European Chemical Industry Council (CEFIC) issued a statement during the Competitiveness Council, urging industry ministers to set the course towards cheaper energy.

Affordable energy “is the number one priority for Europe’s energy-intensive industries,” CEFIC said, pointing that gas and electricity costs in the USA are respectively one third and half of those in the EU.

“If the EU wants to raise industry’s contribution to EU GDP to as much as 20% by 2020, industry should not be saddled with additional policy costs,” CEFIC stressed, referring to the Commission’s proposed 2030 targets on climate change and renewable energy.

According to CEFIC, the Commission’s proposed CO2 reduction objectives would mean “a 70% reduction from 1990 levels” for the chemicals sector, which claims it “has already achieved a 50% reduction” during that period.

The chemicals industry “could do even more,” CEFIC contends. “But the Commission’s proposals, as they stand, are asking too much – and would imply exporting jobs and importing goods.

“Energy and climate policy must be affordable. Undermining Europe’s competitiveness leads straight to de-industrialisation!” CEFIC warned.

Eurofer, the European Steel Association, stressed that the Commission’s proposed CO2 reduction targets for 2030 were simply “impossible to achieve with current technologies” in the steelmaking sector and had to be revised.

Eurofer admitted that the economic recession will make it easier for steelmakers to meet their 2020 emissions reduction goals. But this advantage will soon evaporate, Eurofer argues, because the bar has been set too high for 2030.

“With the so-called correction factor cutting down free allocation since 2013 even the most efficient steelmaker in Europe will have a cost disadvantage vis-à-vis its non-European competitors. Some of the most efficient steel plants may have to buy up to 30% of their needs in emission permits already by 2020. The current surplus from the crisis will in the short term turn into a huge shortage,” it warned.

“The steel industry has lost over 15% of its workforce since 2008. EU crude steel output is down 20% of pre-crisis levels. Without rebalancing the EU’s industrial, climate and energy policies our sector … will further decline and with it industrial manufacturing and jobs in Europe.”

“We need a clear decision that at least the most efficient European companies do not have additional costs from the EU’s climate and energy policies.”

The European Aluminium Association (EAA) “calls for concrete measures to be included in the EU Climate and Energy 2020-2030 package in order to secure the survival of an aluminium industrial basis in Europe,” the EAA Director-General Gerd Gotz said in a press release. “Most importantly on the short term and across the whole EU we need to fully compensate the ETS indirect cost that our industry cannot pass on to our customers.”

The European Commission unveiled a new policy strategy in October 2012, promising a "new industrial revolution" in Europe, and urging immediate action to re-launch manufacturing on the continent.

>> Read: Commission seeks 'new industrial revolution'

The strategy's headline goal is to raise industrial activity to 20% of EU gross domestic product by 2020, compared to 16% today, taking it back up to pre-crisis levels.

The focus is on strengthening industrial competitiveness to support economic recovery and to enable the transition to a low-carbon and resource-efficient economy.

The strategy set out six priority areas for short-term action: advanced manufacturing technologies, key enabling technologies, bio-based products, construction and raw materials, clean vehicles, and smart grids.

  • 20-21 March 2014: European Council to discuss industrial policy

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