Climate Change

ETUI Conference Brussels, 29 March 2011

Towards Industrial Policy

Didier Herbert

Sustainable Industrial Policy

Europe 2020: 7 flagship initiatives underpin the targets

S m a r t G row t h

S u s ta in a b le G row t h

I n c lu s iv e G row t h

In n ov a ti o n« Innovation Union »

C l im a te , e n e r g y a n d

m o b i l i ty« R esource 

efficient E urope »

E m p lo y m e n t a n d s k i l ls

« An agenda for new skills  and jobs  

»E d u c a ti o n« Youth on the 

move »

C o m p e ti ti v e n es s

« An industrial policy for the 

globalisation era »

F ig h ti n g p ov e r ty

« E uropean platform against 

poverty »D ig ita l s o c ie ty« A digital agenda 

for E urope »

I. European Industry: Some facts and figures

•Manufacturing industry is an essential pillar for growth and jobs:One fifth of EU output and employment (more than 50% of private sector employment)Around 4/5 of EU R&D investments75% of EU exports

•Industry solution-provider to tackle societal challenges

II. INDUSTRIAL ACTIVITY CREATES WEALTH AND JOBS...II. INDUSTRIAL ACTIVITY CREATES WEALTH AND JOBS...BUT ALSO HAS UNDESIRABLE EFFECTS…BUT ALSO HAS UNDESIRABLE EFFECTS…

• EU’s CO2 reduction targets – -20-30% by 2020– >-80% by 2050

Natural resource depletionClimate changePollution ofair, water, soilTraffic congestionWasteGlobal population will grow from 6bn to 9bn and they aspire to OECD levels of income

III. Competitiveness in the face of climate change: Questions

•Is there a contradiction between competitiveness and climate change policy (20/20/20 package)?•Does the promotion of sustainability lead to burdens for EU industry’s competitiveness?

Competitiveness in the face of climate change: Some preliminary answers

•EU industry is quite energy efficient compared to other countries and is decoupling growth and pollution. •Industry (directly and indirectly) emits only 25% of total CO2 emissions in EU•Abatement potential for consumers or in transport can be cheaper than in industry

GHG Target:

-20% compared to 1990

-14% compared to 2005

EU ETS-21% compared

to 2005

Non ETS sectors -10% compared to 2005

27 Member State targets, stretching from -20% to +20%

How can we reconcile ambitious climate change objectives with industrial competitiveness ?

When global action is not yet certain …

The Challenge…CLIMATE COMPETITIVENESS

SOCIAL •Some sectors are particularly vulnerable •These industries demand special measures•Risk of Carbon Leakage•All options not Cost Free

ETS - Harmonised allocation rules as of 2013

•Auctioning is default allocation method●Power sector: 100% as of 2013

(save limited exemptions for 10 new MS as per Art 10c)

•Transitional free allocation based on BMsSectors ‘not at risk of carbon leakage’

●Phasing out free allocation (80% of BM in 2013 – 30% of BM in 2020 – 0% in 2027)

Sectors at risk of ‘carbon leakage’●Free allowances , limited to 100% of Benchmarks

II.2 An example of a challenge? Cement

• 1 ton Cement = 0,8 ton CO2

• Avg price cement = €60/ton

• ton CO2=12 Euro

• Risk of greater imports/less exports on third markets

• “Carbon leakage”

CO2 emissions for relevant sectors in the carbon leakage assessment (bubble size indicates size of sector's emissions)

- Sectors in bold do not reach the CL criteria -

Coke oven products

CementPetroleum

Iron and steel

Fertilizers

Organic chemicals

Aluminium

Lime

-10%

0%

10%

20%

30%

40%

50%

60%

-10.0% 10.0% 30.0% 50.0% 70.0% 90.0% 110.0%

CO2 Total costs

Tra

de

inte

nsi

ty

Paper and Paperboard

Plastics (QL)

Ceramic tiles

Bricks

Industrial gases

Casting of iron (QL)

Flat glass

Casting of light metals (QL)

Casting of steel (QL)

QL = Sectors currently under Qualitative assessment

Illustration of a BM curve

Purchased allowances

Free allowances

Benchmark

10% best-sample Nb of installations

Emission Intensity(kg CO2/t product)

How to help industry meeti,ng challenge ? Use industrial policy tools, Ex: SILC

Analysis & Screening

Candidate sectors

SHORT-TERMDevelopment & implementation of

innovation projects

MID-/LONG-TERMScale-up &

demonstrationprojects

Benchmark lineBenchmark line

Free allowancesFree allowances

Purchased allowancesPurchased allowances

SILC I : SHORT-TERM innovation measuresSILC I : SHORT-TERM innovation measures

Several initiatives foreseen

• Bring together relevant technology platforms to ensure appropriate R&D, financing and deployment strategies for low-carbon production

• Promote demonstration projects and uptake for ultra-low carbon production technologies (including CCS)

• Explore opportunities to bring in further innovative incentive mechanisms linked to the carbon market (namely fast movers)

InternalMarket

ICT

Knowledge

Cohesion

Innovation

Skills

Trade

Sustainable

competitiveness

R&D

Competition

CSR

Fiscalbarrie

rs

Employment

Regional

Policy

Infrastructures

Sustainable

Development

ClimateChange

International

Dimension

Market

Access

Energy

Many EU actions contribute to sustainable competitiveness

Markets by themselves will not deliver all the needed solutions…

•Clear Policy Signals are essential – Certainty, Coherence

•Need governments, industry and social partners support:Standards and regulation – implementation crucialDelivering green skillsSupporting environmental technologies

•Share best practice, learn from each other, stakeholder consultation e.g. sustainable industry forum/workshops; industry/private sector engagement

But…Can Europe combine ambitious climate change objectives with strong industrial competitiveness… Importance of global commitments and action

ACTION PLAN ON SUSTAINABLE INDUSTRIAL POLICY and SUSTAINABLE CONSUMPTION & PRODUCTION…

Example : Sustainable Product Policy

Driving the energy and environmental performance of products upwards through ECODESIGNCreating a critical mass of demand through LABELLING and INCENTIVES for the best performing productsRecast Dec 2009 extended to energy-related products;Review by 2012Energy savings of 12% by 2020 from measures already adopted

Global approach for global issueEnsuring a level playing field for Energy Intensive Industries e.g. ETS Benchmarks and encouraging development of Sectoral Approaches

Retail Forum & Food SCP Roundtable

Green supply chains; Share best practice; Wide stakeholder participation; Promote sustainable products; Reduce environmental footprint of retail sector

++ e.g. Green Public Procurement (16% of economy),

Das geschätzte jährliche Einsparungspotential in 2020 entspricht 12% des Stromverbrauchs in Europa in 2007

Enterprise and Industry Directorate-General

Sustainable Industrial Policy

Verbesserungspotential der verabschiedeten Maßnahmen

Annahme Einsparpotential (jährlich bis 2020)

1275/2008 Stromverluste im Bereitschafts- und Ruhezustand von Haushalts- und Bürogeräten

17.12.2008 35 TWh

107/2009 Einfache Set-Top-Boxen 04.02.2009 6 TWh

244/2009 Haushaltslampen mit ungebündeltem Licht

18.03.2009 37 TWh

245/2009 Straßen- und Bürobeleuchtung 18.03.2009 38 TWh

278/2009 Externe Netzteile 06.04.2009 9 TWh

640/2009 Industriemotoren 22.07.2009 135 TWh

641/2009 Heizungsumwälzpumpen 22.07.2009 25 TWh

642/2009 Fernsehgeräte 22.07.2009 26 TWh

643/2009 Haushaltskühl- und Gefriergeräte

22.07.2009 4 TWh

315 TWh

Ökodesign-Verordnung

Environmental goods and services - the window of opportunity…

• New markets, in Europe and internationally,

• Lead these markets internationally • But market shares under threat • Use trade policy – upcoming FTAs• Relationship between core and

connected industries; upstream suppliers and downstream users; business models

• “You are only as Green as your Supply chain”

Stimulus Packages:• China >$200 bn green investments• Korea >80% green; Green New Deal $93

bn >1 m green jobs

The EU needs to be economically and socially as well as environmentally sustainable. Only economically successful companies developing innovative products will be able to contribute to effective environmental protection and social progress. Europe is responsible for only around 13% of global carbon emissions and it does not make economic or environmental sense to inadvertently overburden industry here and drive production to less efficient locations. The EU will only be able to fulfil its leadership role in this field if it manages to show that is indeed realistic and feasible to combine optimal levels of resource efficiency with industrial competitiveness.Net impact on number of jobs likely to be relatively limited, but many more job reallocationsWide impact on skills, job content…Need for high quality jobs

Green is always Good?

Facilitating industrial change

•Mainly responsibility of social partners•Consult on European framework for restructuring•Globalisation Adjustment Fund•Cohesion policy and Structural Funds•Rescue/restructuring Guidelines

Flagship Initiative: "An industrial policy for the globalisation era" (ref. COM(2010) 614 of 28/10/10)

…supporting the transition of manufacturing sectors to greater energy and resource efficiency

…reducing the transaction costs of doing business in Europe, promoting clusters and improving affordable access to finance

…promoting the restructuring of sectors in difficulty towards future oriented activities, including through quick redeployment of skills to emerging high growth sectors and markets

…promoting technologies and production methods that reduce natural resource use

…supporting the transition of service and manufacturing sectors to greater resource efficiency, including more effective recycling

Flagship Initiative "Resource efficient Europe" in 2011

•The aim is to support the shift towards a resource efficient and low-carbon economy that is efficient in the way it uses all resources. The aim is to decouple our economic growth from resource and energy use, reduce CO2 emissions, enhance competitiveness and promote greater energy security;

•Resource efficiency means doing more with less. It means managing our resources - material resources such as metals, minerals and food, and natural resources which provide services, such as clean air, land and water - sustainably, throughout their life cycle, so as to reduce the environmental impact of their use.

•But need to carefully manage transition from industry perspective – not automatically win-win or cost free

26

Efficient pathway:-25% in 2020-40% in 2030-60% in 2040

A cost-efficient pathway towards 2050

80% domestic reduction in 2050 is feasiblewith currently available technologies,with behavioural change only induced through pricesIf all economic sectors contribute to a varying degree & pace.

0%

20%

40%

60%

80%

100%

1990 2000 2010 2020 2030 2040 2050

0%

20%

40%

60%

80%

100%

Current policy

Power Sector

Residential & Tertiary

Non CO2 Other Sectors

Industry

Transport

Non CO2 Agriculture

Contact:

Didier HerbertEuropean Commission Directorate-General Enterprise and Industry Sustainable Industrial Policy Tel: +32.2.29.90087http://ec.europa.eu/enterprise/policies/sustainable-business/index_en.htm