Opportunity or disaster? Commission set to launch new EU Industrial Strategy

Published by Anton LAZARUS at 10 March 2020

The European Commission will today publish its new industrial strategy, a unique opportunity for transformational change to the manufacturing sector in the EU.

Ahead of the publication of the strategy, the European Environmental Bureau (EEB) has set out seven key areas where action is needed to ensure success.

**Update: The EEB’s detailed initial response to the EU Industrial Strategy was published on 13 March 2020. [Click here to download].**

The EEB is Europe’s largest network of environmental organisations with more than 160 members in over 30 countries.

Davide Sabbadin, EEB Policy Officer for Climate and Circular Economy said:

“This strategy could be an opportunity to completely transform the way European industry operates. Europe needs to be ready to embrace a new industrial revolution, with clean, safe and sustainable jobs. A strategy that fails to deliver would be a disaster for the aim of reaching climate neutrality and other commitments made in the European Green Deal.”

The seven key areas identified by the EEB are:

Avoiding fossil fuel lock-in
Maintaining ambition
Ending industrial pollution
Financing the right projects
Making the ETS, carbon pricing and a carbon border adjustment effective
Putting material efficiency and the circular economy first

On Wednesday (11 March 2020), the European Commission will publish its Circular Economy Action Plan, which is expected to present a bold agenda to transform the economy and tackle waste.

The new EU Industrial Strategy was announced in the European Green Deal as one of its main pillars and comes after the Masterplan on Energy Intensive Industries presented in December last year.

Table of key issues with further information and EEB comment:

What is needed	Comment:
Avoiding fossil fuel lock-in An end to investments in fossil fuel projects. The EU’s financial and economic planning policies must be coherent with climate neutrality. This means phasing out investments in fossil-fuel based industrial activities (energy production and energy consumption).	The oil and gas industry has created a false narrative around solutions based on fossil fuels, such as fossil hydrogen and decarbonised gas, which they are promoting as “transitional technologies”. This creates a double liability because: They are bound to become stranded assets due to their non-compatibility with climate neutrality, this is likely to be particularly the case in areas that are currently heavily dependent on coal which should be spared the need to transition twice – first to gas, then to renewables. They drain resources that could be invested in more effective measures, such as boosting the circular economy the electrification of industrial processes.
Maintaining ambition There must be a clear committment to a climate neutrality target for the industrial sector, with a clear roadmap and intermediate targets	Making no reference to carbon neutrality as a sectorial target leaves room for burden shifting and blurry commitments ahead. The lack of a clear roadmap on how to get there, with intermediate targets, leave rooms for bad investments in a moment Europe should be focusing on the highest-delivering policies. All member states should develop specific decarbonisation road maps for each sector. We think the European Commission missed a chance to carve in stone that climate neutrality is this sector’s duty as much as anyone else’s and industry should not rely on other sectors such agriculture or forestry to offset what are today considered its hardest-to-abate emissions
Good governance To allow for a balanced and transparent control of this vital process, we request that an independent ‘EU Industrial Policy Observatory’ composed of relevant stakeholders, including civil society organisations, shall be established to continually monitor progress towards climate neutrality objective and suggest corrective measures in an evidence-based, inclusive and transparent manner should real emissions deviate from the trajectory.	Civil society should be given the chance to have a say in the process of transitioning our economy to carbon neutrality. The relevant amount of public money that will be invested in re-engineering and re-designing products and processes, infrastructure, research and development must be geared towards the most promising solutions and best value for money, an effectively functioning independent body could ensure this.
Ending industrial pollution We don’t just need to decarbonise, we need to de-pollute. Upgrading industrial processes in view of climate neutrality is an unmissable opportunity to achieve other environmental benefits	According to the EEA, industry was responsible for over half of all anthropogenic emissions to air of CO2, SOx, NMVOC and the heavy metals Cd, Hg and Pb in 2017. Poor quality of air, surface and ground waters are generally associated with the presence of fossil-fuelled and chemical industrial compounds, We believe that the Industrial Strategy must be aligned with the EU goal of zero-pollution and address the hazardous chemicals problem across sectors, as well as being aligned with the risk management hierarchy of actions in risk management that prioritises exposure prevention, elimination and substitution over control measures; The strategy should therefore accelerate the plans for different EU legislation and policies and promote financial incentives for sustainability throughout the production chain. As the Industrial Emission Directive is set for revision in 2021, we think that climate neutrality should be fully integrated in the BREFs (best available techniques (BAT) reference documents), the BAT concept shall be re-designed to provide for the best ratio of environmental impact of industrial activity versus public good/service provided and set on technical feasible levels. The following items are to be prioritised: energy and protein production, water quality and supply, resource management, substitution of chemicals of concern. Full internalisation of external costs (e.g. air pollution) is paramount and any support scheme should ensure beyond EU standards performance. Environmental benchmarking, transparency and stronger enforcement provisions are also necessary to monitor success. More information here.
Financing the right projects EU money must be invested where is is most effective. As of today, only part of the EU money has been spent efficiently on good projects effectively delivering climate and environmental benefits. This remains but a fraction of what is needed and is often weakened by poorly targeted funding. Finance must be better targeted to provide for the massive amount of public investments needed for transitioning our industrial system towards carbon neutrality in a pathway compatible with the IPCC’s 1.5 degrees scenario.	As we expect unprecednted demand for financing totransform a very carbon-intensive sector, EU money must be used to leverage priviate funding. Project that recieve funding should meet strict climate and environmental standards and represent best value for money. It is important that the worst-performing processes and faciltiies are tackled first. . This could be done according to a defined timeline and on the basis of progressive ambitions on environmental performances, as is the case, for instance, for ecodesign measures. This would prevent the possibility for companies to be financed for pilot projects for an undefined time span, while they continue to produce products with a high climate impact. Given the existing basket of technologies and very long investment cycles in resource and energy-intensive industries, a set of no-regrets options, such as maximisation of renewable energy uptake and performance targets for increased circularity, should be prioritised in the transition and no longer bedelayed under the pretext of technological neutrality.
Making the ETS, carbon pricing and a carbon border adjustment effective The negative externalities of carbon emissions need to be fully reflected in the price of products available on the European Market. The practice of insufficiently targeted and over generous handouts of free allowances to carbon-intensive industry sectors needs to stop.	Industrial emissions covered by the EU’s Emissions Trading System (EU ETS) have been stagnating in the last 7 years. Past and current debates have been focusing more on protection against international competitiveness than on creating incentives for industry to transform and deeply decarbonise. Free allocations of ETS emission allowances have been extremely untargeted and in some cases has led to windfall profits or businesses that failed to take action to cut their emissions. Top Should a border carbon adjustment be introduced, it would need to take into account the following: Its introduction would need to go hand in hand with a full phase out of free allowances. It would need to be accompanied by diplomatic efforts to steer the targeted country/countries towards better implementation of the Paris Agreement. Negative impacts on most vulnerable nations would need to be mitigated as much as possible (either with explicit exemptions or by earmarking revenues fully for targeted international climate protection assistance).
Putting material efficiency and the circular economy first Low-carbon markets for products such as steel and cement must be promoted through dedicated policies such as compulsory recycled content targets in new materials and Green Public Procurement. Just prioritizing demand-driven pull measures such as GPP is not enough, the Commission needs to identify a list of carbon intensive technologies that must be phased-out (such as coal). Policies based solely on demand-driven measures do not create an ambitious framework and will not secure the achievable savings that material and energy efficiency can deliver. Therefore, we call on the Council and Parliament to: Introduce a brown list of phase-out technologies set targets to reduce overall virgin resources use and its environmental impact by 2030 for metals, minerals and plastics define roadmaps to zero waste for all industrial activities Make sure plastics are long-lasting and reusable and, when they are discarded, are collected through material loops systems decontaminating and recycling them with equivalent functionalities as virgin	The 2019 OECD Global Material Resources Outlook to 2060 projects that, in absence of new policies, global materials use would almost double from 89 Gt in 2017 to 167 Gt in 2060,with catastrophic consequences for people and the natural world. In Europe, industry is a massive market for these raw materials and fuels. The construction sector is the main market for cement and steel, two of the most relevant and GHG emitting industrial sectors. It is also a prominent market for PVC and other plastic streams. Adding to that, construction waste is the single largest waste stream in Europe. Circular economy provisions alone could cut over 50% of heavy industry’s emissions and should be regarded as the number one no-regret choice for both public and private investments.

ENDS

For more information:

Davide Sabbadin (EN, IT)

Policy Officer for Climate and Circular Economy

davide.sabbadin@eeb.org

+32492279700

Christian Schaible (EN, FR, DE)

Policy Manager for Industrial Production

christian.schaible@eeb.org

+33 659379880

Anton Lazarus

Communications Manager

anton.lazarus@eeb.org

+32 2 289 13 09