European businesses need clear direction, not populism

A strong and clear political climate commitment leading to the right policies and measures will help Europe’s industry thrive in a zero-carbon world.

Last week, a veto by the Polish, Czech, Estonian and Hungarian governments led to the failure of the long-awaited endorsement of the EU’s long-term climate strategy and commitment to climate neutrality by 2050. 

While claiming to protect the interests of their citizens and businesses by blocking (delaying) EU climate action, as stated by the Polish Prime Minister, these governments are helping neither their citizens nor businesses that need investment certainty to make informed decisions about their future.

Below we take a closer look at the role that an EU commitment to net-zero emissions can play in decarbonising Europe’s industrial sector.

How to solve Europe’s heavy climate problem

Europe’s resource and energy-intensive industry like steel, cement and chemical sectors are responsible for about 40% of the bloc’s greenhouse gas emissions under the EU emissions trading system, making it the third largest climate polluter in Europe. If the EU is serious about cutting its carbon pollution enough to avert the worst impacts of climate change, the industrial sector needs to embark on a carbon-neutral path as soon as possible. 

The EU carbon market has failed at its task to cut industry pollution. In the absence of true incentives, mostly due to exceptions and over-generous pollution handouts, carbon pollution from heavy industry has not decreased since 2012 and is not predicted to do so until 2030 (EEA, 2018). 

In light of these facts, it is clear that Europe needs to do much more to pursue an industrial zero-carbon transition. 

A number of studies have shown that decarbonising energy-intensive industries is possible and a number of solutions to that end already exist. Implementing them will require a range of industrial climate policies, such an integrated innovation framework, an enhanced circular economy package, and an aligned energy and industry transition.

But what does the long-term climate strategy have to do with it?

The EU long-term climate strategy and the commitment to net-zero emissions have the potential to set Europe and its industry on a clear decarbonisation path. 

First, by endorsing the long-term strategy, EU leaders would send a strong political signal to the industry that translates into investment certainty. This is key for sectors where investment cycles are typically long, meaning that 2050 is only one such cycle away.

Second, having a clear objective in place would allow developing the necessary policy and financial framework that will help companies to pursue decarbonisation. 

Third, the endorsement of the long-term climate strategy would give an unequivocal signal to the European Commission for the development of the upcoming EU 2030 industrial strategy. The industrial strategy is expected by the end of the year and will focus, among other things, on the opportunities and challenges linked to the transition towards a climate-neutral and circular economy. A clear long-term climate objective will be hard to ignore and will have to be integrated into the strategy.

What happens next?

Back to the political stand-off. Looking at this climate scandal from another perspective shows that after initially having been backed by only a handful of countries, now almost all EU countries support reaching climate neutrality by 2050. This is not to be underestimated, and it is only a matter of time before the blockers must come around. This will require persuasion and constructive discussions to ensure that everyone can get on board a clean transition that is fair but effective. 

In the end, stopping the climate crisis and ensuring clean and prosperous European businesses is in the best interest of all Europeans.

Further reading:

Cracking Europe’s hardest climate nut – How to kick-start the zero-carbon transition of energy-intensive industries?