Mind the technological gap

A sector-specific approach is needed future climate policies.

If Europe wants successful climate policies as well as successful industries, climate targets have to reflect the actual mitigation potential of individual sectors. This is not what they do today. There is a considerable difference between the European Commission’s medium- to long-term objectives and the realistic mitigation potential of individual industry sectors.

The European Commission’s ‘Roadmap for moving to a low-carbon economy in 2050’, for instance, postulates that by 2050 European industry’s carbon emissions should be 80%-95% lower than in  1990. Industries have been invited to draw their own sectoral roadmaps and find pathways leading to the 2050 objectives. This indicates a willingness on the part of lawmakers to enrich their concepts with the concrete facts of industrial reality. The question now is: how will the results be dealt with, especially in the forthcoming 2030 climate and energy package?

A study by the Boston Consulting Group, made by the European Steel Association Eurofer, found that the steel industry could reduce emissions by 15% in a scenario in which the best-available technologies are disseminated, best practice is shared throughout the sector and a larger share of steel is produced via recycling of scrap in electricity-based installations.

The study – the “Steel roadmap for a low-carbon Europe 2050” – containing these results has just been published. It presents detailed analyses of several abatement scenarios, looks into potential future breakthrough technologies for CO2 mitigation and scrutinises the technical and economic feasibility of each alternative carefully. The outcome is that the targets of the Commission’s roadmap to 2050 are far beyond the reach of the European steel industry. As a matter of fact, the sector will not even be able to meet the 2030 intermediate milestone of 43%-48% of the European Union’s emissions-trading scheme (ETS) mentioned in the Commission’s roadmap.

So, how will this be dealt with in the debate over 2030? Unilateral climate action along the mitigation path suggested by the Commission would have potentially devastating effects on the EU steel industry. And steel is not the only sector which cannot come up with the mitigation potential envisaged by the Commission. The ETS will not help, although some people see it is as a means to incentivise investments in low-carbon technology: carbon pricing alone will not bring about the breakthrough technologies necessary for the steel sector.

It seems clear that European climate policies cannot be a technology-free zone anymore. They will have to be sector-specific as well as technology-based. Mitigation potentials are not identical over the whole of European industry and technological preconditions vary. A new balance will have to be found between the incentives for CO2 mitigation and protection from CO2 costs that distort international competition. This will perhaps be a more difficult road than setting one unified, undifferentiated target. But it clearly is the way to go.

Gordon Moffat is the director-general of Eurofer, the European Steel Association.