By Ewa Krukowska

Nov 28, 2019

(Bloomberg) European heavy industries like cement, steel and refining will need massive investment if the continent is to reach a goal of being carbon neutral in three decades, according to a new report.Spending on new technologies, ensuring a supply of clean energy and improving carbon pricing systems are among the measures required to meet the target, said the report published Thursday by a high-level European Union advisory group. Without them, local industry can’t be competitive against foreign rivals, the Expert Group on Energy-Intensive Industries said.“It’s helpful to see that the heavy industry is interested in joining the fight against climate change,” said Johanna Lehne, policy adviser at the E3G environmental think-tank. “They need to recognize that climate ambition will be their competitive edge going forward and to start demanding the required policy framework to deliver that ambition.”

Ursula von der Leyen, who is set to become EU Commission president on Dec. 1, has laid out the broad strokes of an unprecedented policy to make Europe the first climate-neutral continent by 2050, a strategy that would put the region ahead of its main trading partners China and the U.S. in tackling pollution and making good on the Paris agreement to limit global warming. The commission is due to reveal more details about the Green Deal next month.

Von der Leyen pledged to toughen an existing 2030 goal by cutting emissions by 50% or even 55% compared with a previous target of at least 40%. She also wants to unlock 1 trillion euros ($1.1 trillion) of investment over the coming decade through the European Investment Bank.

“The missing link in the European Green Deal so far is a strong, sophisticated and innovative industrial policy for Europe,” said Marco Mensink, director general of chemical industry association Cefic, whose members include BASF SE and Dow Chemical. “The masterplan released today is a key step towards such an ambitious industrial policy for Europe.”

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The report by the advisory group, which includes energy-intensive companies, national governments and non-governmental organizations, calls for breakthrough technologies and infrastructure. Yet it warns these can only come with policy help. Recommendations include:

Attract private investment through EU programs, funds and use tax policy to encourage projects like carbon capture and chemical recycling of plastic waste. These require technology risks, large amounts of capital and often high operating costs
Change consumption patterns, create markets for climate-neutral, circular economy products. This could be done through product labeling that highlights environmental footprint compared with imported products
Consider alternative or complementary options for carbon pricing and ensure access to climate-neutral energy at “globally competitive prices”

Energy-intensive industries are part of the EU Emissions Trading System, the world’s biggest cap-and-trade program. To prevent the risk of companies relocating to regions without emission curbs, they get a share of free permits to discharge CO2.

To better shield the industry as Europe boosts its climate ambition, von der Leyen promised a carbon border tax, fully compliant with the World Trade Organization rules and initially imposed on a number of selected sectors.