The European Climate Foundation launches today its new flagship project Industrial Transformation 2050. Together with industry and other stakeholders, the initiative aims to co-develop a credible and feasible industry roadmap that is in line with the Paris Agreement, as well as the policy frameworks needed to achieve a thriving, competitive and climate friendly European industry in 2050. The project is part of ECF’s Net-Zero 2050 Initiative.
The challenge for industry
The Paris Agreement commits countries globally to make the transition to a net-zero economy as imminently as possible – this applies to all sectors, also to heavy industry. Resource and energy intensive industries represent about 20% of the EU’s overall carbon emissions. Prior to 2010, industries in Europe have achieved considerable emission reductions, but more recently, industry emissions have been stagnant, and even increased in 2017 for the first time since 2010. Current projections envisage these emissions will not decrease unless further action is taken. Furthermore, most European industry-led decarbonisation roadmaps are inconsistent with the Paris Agreement or based on assumptions which do not reflect demand side potentials from process or business model innovations. As a result, most existing 2050 roadmaps by governments and industry associations only anticipate emission cuts of about 50% by 2050, mainly through further efficiency gains, fuel switch, and electrification.
Recent analyses by the European Climate Foundation and its partners, amongst other thought-leaders, suggest that more ambitious emission reductions are in fact feasible, and could not just maintain but enhance industrial competitiveness. This is shown in a recent report commissioned by ECF and SITRA, the Finnish Innovation Fund, and undertaken by Material Economics. It highlights that there is an untapped potential for cutting emissions by for example more efficiently using and reusing resources in heavy industry, such as steel, chemicals and cement sectors. The report finds that “[d]emand-side measures can take us more than halfway to net-zero emissions from EU industry, and hold as much promise as those on the supply side. Moreover, they are often economically attractive” (Material Economics, 2018, full report accessible below). Combining these demand side measures such as enhanced circularity and resource efficiency along the whole value chain with supply side technologies that are not yet commercially demonstrated, could bring the industry down to net-zero emissions.
Enabling a thriving climate-friendly industry
Industry transformation towards net-zero carbon pollution will require and stimulate innovation in products and processes, the development of new business models, and new forms of cooperation across industries. It will also be needed to unleash and redirect large amounts of investments to upgrade the existing asset base and increasingly build new, low-carbon plants and infrastructures.
While many of these investments have a business case already today and would help companies to increase competitiveness, they are blocked by a range of hurdles. Policy frameworks will need to be adjusted to make these investments viable for companies.
This is true in particular for the smarter use of resources enabled by an increasingly circular economy. Embracing circularity principles, resource and energy intensive industries have the opportunity to become global leaders in the transformation to a net-zero carbon economy in Europe and strengthen their role as backbone of strong industrial value chains in Europe. This will allow them to tap into new sources of value and jobs creation in an increasingly service based economy.
Early development and adoption of other technology solutions required for a net zero pathway, in particular breakthrough supply side technologies such as hydrogen or electricity based steel making or commercialization of new climate friendly materials, will also help secure European companies a competitive edge in the emerging low-carbon markets and value chains. The importance of this should not be underestimated in a context where customers downstream in the value chain are increasingly asking for sustainable and ultimately zero-carbon materials to reduce the climate footprint of their products.
To enable the transformation, a comprehensive and reliable policy framework will be necessary to unleash investment in research and innovation, as well as market deployment creating demand for new climate friendly products. Most of the emissions reductions under the EU-Emissions Trading System will come from energy generation. For emission-intensive industrial processes with relatively higher CO2-abetement cost, there is a need for a policy tool box that supplements the EU-ETS and that enables additional emissions reductions in a way that minimizes cost and ensures competitiveness of the European industry. The policy tool for industry must remove non-market barriers and should include sufficiently large research and innovation/market introduction programs; strengthened existing instruments such as financial disclosure, eco-design standards as well as full implementation of instruments such as green public procurement and contracts for difference or consumption charges. These instruments need to be combined as part of a ‘smart and clean industry policy package for Europe.’
The aims, role and activities of IT50
To foster these dynamics, ECF launches Industrial Transformation 2050 (IT50). In collaboration with basic materials and manufacturing industry and other stakeholders, it will co-develop pathways to net-zero industrial carbon emissions in Europe in line with the Paris Agreement objectives; as well as the policy frameworks that will help industry to embark on this transformation, making climate and intrinsic part of a comprehensive industrial strategy with the goal to have a thriving and competitive European net-zero emissions industry by 2050 the latest. These issues will be of key importance for the long-term climate vision and strategy to be published by the European Commission by COP24, as much as for the member state climate strategies expected in 2019.
The analytical side of the project builds on the work by the Energy Transition Commission (ETC), Material Economics, and recently published industry roadmaps like the IEA CSI Cement Roadmap, Cefic, the BDI, Dena and Acatech work in Germany and will liaise with other current initiatives. The IT50 scenarios will focus on metals in particular steel and aluminium; chemicals, in particular plastics; and cement and concrete sectors that together are responsible for approximately 60% of the EU’s industry carbon emissions.
The IT50 project draws some of its inspiration from the ECF´s experience with the “EU Power Roadmap 2050”. This first major ECF flagship project from 2009/10 helped bring about a credible vision for a low-carbon energy system in Europe, by providing a platform for fact-based debate between politics and the energy industry. The then EU Energy Commissioner Gunther Oettinger praised the roadmap as an “important contribution to the preparation of a practical guide to a low-carbon Europe”. Close engagement with and endorsement by a broad industry coalition were vital success factors for this impact at the time.
In a similar way, Industrial Transformation 2050 aims to engage leading companies in the steel, cement and chemicals sectors, joined by civil society, and public sector institutions, to jointly develop net-zero vision pathways for the resource and energy intensive industries in Europe, and to advocate for required policy frameworks at EU and country level. The initiative aims to publish its industry 2050 vision in spring 2019.
The Industrial Transformation 2050 consortium brings together Agora Energiewende, Carbon Market Watch, Climate Strategies, German Institute for Economic Research (DIW Berlin), Institute for European Studies at the Vrije Universiteit Brussels, Institute for Sustainable Development and International Relations, Material Economics, World Wild Fund for Nature (WWF) and Wuppertal Institute.
About the Net-Zero 2050 initiative
The Net-Zero 2050 is a new initiative of the European Climate Foundation with contributions from a consortium of experts and organisations funded by the ECF.
The objective of Net-Zero 2050 is to start building a vision and evidence base for the transition to net-zero emission societies in Europe and beyond, by midcentury at the latest. The Paris Agreement commits us to making this transition, and long-term strategic planning shows that many of the decisions and actions needed to get us on track must be taken without delay. Reports in the series seek to enhance understanding of the implications and opportunities of moving to climate neutrality across the power, industry, buildings, transport, agriculture, Land Use, Land-Use Change and Forestry (LULUCF) sectors; to shed light on some of the near-term choices and actions needed to reach this goal, and to provide a basis for discussion and engagement with stakeholders and policy-makers.
With acknowledgement of the source, reproduction of all or part of the publication is authorised, except for commercial purposes.