Concrete policy frameworks
This week, the President of the European Commission announced a new Green Deal Industrial Plan, the plan to make Europe the home of clean tech and industrial innovation. The plan will initially focus on speeding up regulatory approval for clean tech industrial projects. However, experts are sceptical, saying industrial policy concerns regularly come back to the EU policy debate, with little result so far.
Since the launch of the Green Deal in December 2019, several policy milestones impacting the industrial decarbonisation efforts have been achieved. Starting back in May 2020, the Council approved conclusions on the EU chemicals strategy for sustainability. The strategy sets out a long-term vision for the EU chemicals policy. Continuing the timeline, in September and November 2021 was the turn for the Fit for 55 Package to be discussed from an industrial perspective. Back then, ministers stressed the importance of the proposed carbon border adjustment mechanism (CBAM), and the review of the energy taxation directive.
Carbon border adjustment mechanism (CBAM) targets imports of carbon-intensive products.
The objective of CBAM is to prevent that the greenhouse gas emissions reduction efforts of the EU are offset by increasing emissions outside its borders through relocation of production to non-EU countries or increased imports of carbon-intensive products.
If the European Green Deal was the starting gun for the EU’s race to achieve climate-neutrality by 2050, the EU Industrial Strategy was the first hurdle back in 2020. EU-wide industrial strategy aimed to redraw the market landscape, in the understanding that European manufacturing is not doing its fair share of decarbonisation in terms of GHG emissions, in part possible thanks to the EU Emission Trading Scheme (ETS).
The announcement of the Green Deal Industrial plan is a clear response to America’s $369 billion Inflation Reduction Act (IRA), and to the Chinese subsidies for the production of green technologies. In the past, the measures for industrial policy remained too narrow in scope and based on the usual reliance on the benefits of the Europe’s Single Market. The new push for speed and simplicity should also address the gaps already identified, harmonizing rules, presenting a clear commitment to support industry in making the transition. Moreover, policy makers also need to improve coordination to enhance synergies and scale.
The thread to the competitive position and the increased risk and likelihood of carbon leakage are two most common remarks when policy frameworks are discussed by economic experts and industry leaders. Policy framework is a central point of concern for the decarbonisation of the chemical industry, currently an overlap between the different policy instruments can be spotlighted. Going forward, certain policy prerequisites are common in decarbonisation roadmaps. These conditions can be broken down into the following eight components.
RD&I program for industrial low-CO2 technologies.
Infrastructure and interconnections to generate carbon-neutral energy.
Competitive electricity prices.
Consistency within the energy and climate policy framework to ensure that energy consumption and low-carbon policies are compatible.
Competitive hydrogen production.
Public and political acceptance of CO2 capture technologies.
Implementation of CO2 capture technologies maintaining international competitiveness.
Industrial symbiosis and circular economy along the value chain.
By not being centralized, the fragmented approach to industrial policies initiatives makes it difficult to understand what is going on even for the experts in the field. In order to reduce emissions and become greener and more circular interested parties must understand that, the EU Energy Efficiency Directive (EED), the Circular Economy Action Plan, the Emissions Trading System, the Waste framework Directive, the Hydrogen Strategy, the Energy System Integration Strategy, all play a role in defining the path forward, therefore policymakers should make it easier to build bridges between policies, avoiding overlaps and above all, give a clear market signal by setting up targets in industrial sector. Moreover, a key element in the “fit for 55” package is the revision of the Renewable Energy Directive (RED II), to help the EU deliver the new 55 % GHG target.
