Europe’s Clean Industrial Deal and the Affordable Energy Action Plan balances decarbonisation, competitiveness, and energy security — but the devil will be in the details
The European Commission issued the Clean Industrial Deal (CID) and the Affordable Energy Action Plan today, a “significant effort to achieve multiple objectives: decarbonisation, competitiveness, and energy security,” according to Alessia Virone, Government Affairs Director, Europe, at Clean Air Task Force. “Balancing these competing demands in a changing geopolitical and uncertain environment will be a challenging yet essential test of the package’s success. The EU will need to take strong, practical actions to boost investors’ confidence and reduce system’s cost to deliver on climate commitments while ensuring a resilient and competitive economy.”
Virone continued:
“The Communications published today are a step in the right direction, and include a broad range of initiatives which could contribute to building a sustainable economy in the EU. However, to ensure they deliver on their ambition, specific initiatives will have to be fully fleshed out, sufficiently funded, and effectively implemented.”
“The CID acknowledges that the technologies needed to achieve decarbonisation can bolster the EU’s competitiveness, making climate action an enabler of rather than an obstacle to Europe’s industrial success. We’re encouraged to see this, as both of these objectives are mutually reinforcing. Only by championing clean technologies and products early and effectively can the EU hope to secure a sizeable share of these nascent global markets.
The CID follows the Letta and Draghi reports which call for a bolder, more innovation-centric industrial policy for Europe. It lays out a roadmap for Europe’s industrial future at a pivotal moment for the continent, and touches on a wide range of issues and efforts.
Additional perspectives on elements of the CID:
Climate ambition
On climate, an ambitious proposal for the 2040 climate targets will also be needed without delay to further substantiate the commitment from the Clean Industrial Deal to deliver on both competitiveness and decarbonisation. It should be done through a robust design, separating emissions reductions, permanent carbon removals, and temporary carbon removals – as also recommended by the European Scientific Advisory Board on Climate Change.
Hard-to-abate sectors
The dual focus of the Clean Industrial Deal on hard-to-abate sectors and clean technologies will be crucial to deliver impact. Given the complexity of industrial decarbonisation, a sector-specific approach is needed to coordinate the complementary roles of key technologies like electrification, clean hydrogen, and carbon capture and storage. While the Communication already references steel and metals, chemicals, and transport, this sectoral approach could be extended to other hard-to-abate industries like cement or refineries.
Hydrogen
Measures on specific clean technologies will also be key. As mentioned in the CID, clean hydrogen has a central role to play in the decarbonisation of industries and the EU commitment to scaling this energy vector and a key industrial feedstock is welcome. The measures referenced in the Communication, including a third Hydrogen Bank call and the launch of the Hydrogen Mechanism, could support hydrogen deployment. However, transitioning from a carbon-intensive hydrogen production today to making hydrogen a practicable climate solution, requires a fundamental change of approach. A rethink of the EU’s 2020 Hydrogen Strategy that is not delivering results is in order, focusing on technological inclusivity, high-impact end uses, and centralised production-consumption hubs.
Carbon management
On carbon management, the commitment to implementing the Industrial Carbon Management Strategy and the focus on building a business case demonstrates that these technologies will remain high on the EU agenda, as they are indispensable in decarbonising key industries in Europe. The CO2 markets and transport regulation and measures to ensure efficient deployment of CO2 infrastructure in the EU will be especially important. The announced harmonisation of carbon accounting methodologies can be a positive step if it is based on a comprehensive and accurate lifecycle assessment methodology and robust monitoring and verification. Moreover, strong leadership from the Commission will also be needed to ensure the EU deliver on its 2030 CO2 storage target from the Net Zero Industry Act (NZIA).
Markets
The announced measure to create lead markets are one of the strong points of the communication today. Regarding the creation of markets, CATF strongly supports the integration of non-price criteria like climate performance into the EU budget, programmes, and public procurement. To ensure clarity and streamline implementation, these criteria should be mandatory across all levels of governance. Similarly, public and private procurement can be powerful tools if strong non-price criteria is applied.
Grid decarbonisation
The Affordable Energy Action Plan includes initiatives for grid decarbonisation, modernisation, and system planning. While these are positive developments, a fundamental change of approach to energy decarbonisation is needed, shifting from a patchwork of decarbonised energy technologies to a comprehensive system-thinking and coordinated planning, ensuring the timely deployment of decarbonised 24/7 energy.
Innovation
According to the IEA, about 35% of the emissions reductions required to achieve net zero by 2050 will come from technologies that are not yet available on the market. Innovation must therefore be a cornerstone of the Clean Industrial Deal. Technologies like fusion and superhot rock geothermal energy have the potential to provide nearly limitless clean firm energy, but they require significant public support to reach commercial viability. The reference to the upcoming fusion strategy and the creation of Public-Private Partnerships (PPPs) is a needed and crucial step to close the innovation gap and foster a supportive fusion ecosystem. Similarly, the mentions on the role of geothermal are welcomed, although a strong commitment to deliver a strategy on geothermal energy is still needed.
Funding
On funding, the effort to use the untapped potential of the European Investment Bank and developing an Industrial Decarbonisation Bank are much needed. Likewise, better coordination across different funding mechanisms and a dedicated Horizon Europe pilot call could be positive. However, to be able to truly deliver on its ambition, the CID will need to be accompanied by a strengthened post-2027 EU budget and a substantial Competitiveness Fund, which will require the Commission to build consensus among Member States ahead of the budgetary discussions this summer.
Global markets and simplification
Importantly, the EU will need to be careful in ensuring that its so-called ‘simplification’ agenda does not lead to weakened climate ambition and standards. The changes to the Carbon Border Adjustment Mechanism (CBAM) will be one of the first tests on the ability of the EU to deliver simplification while avoiding diminished climate impact.
“In summary,” finished Virone, “while not perfect, the Clean Industrial Deal and the Affordable Energy Action Plan include a plethora of measures that could support the competitiveness and decarbonisation of the EU economy. The devil will, however, be in the details and will depend on the tangible measures adopted to implement the vision outlined today.”
Press Contact
Troy Shaheen, Communications and Marketing Director, Clean Air Task Force, [email protected], +1 845-750-1189
About Clean Air Task Force
Clean Air Task Force (CATF) is a global nonprofit organization working to safeguard against the worst impacts of climate change by catalyzing the rapid development and deployment of low-carbon energy and other climate-protecting technologies. With more than 25 years of internationally recognized expertise on climate policy and a fierce commitment to exploring all potential solutions, CATF is a pragmatic, non-ideological advocacy group with the bold ideas needed to address climate change. CATF has offices in Boston, Washington D.C., and Brussels, with staff working virtually around the world. Visit catf.us and follow @cleanaircatf.
