HomeEnvironnementForging a Post-Carbon Industry: Insights from AsiaReport October 2024Forging a Post-Carbon Industry Insights from Asia Environment Europe and InternationalShareAuthor Joseph Dellatte Resident Fellow - Climate, Energy and Environment Dr. Joseph Dellatte joined Institut Montaigne’s Asia Program in 2022 as Research Fellow for Climate, Energy, and Environment. He specializes in international climate policy and global climate governance, ETS linkage, and political barriers to carbon pricing development in the Northeast Asian region. Interviewees Interviews with Chinese StakeholdersEDF Beijing Representative OfficeEnergy Foundation ChinaEnvironmental Defense FundChinese Academy of ScienceChinese Academy of Social Science (CASS)Shanghai Institute for International StudiesResearch Institute for Carbon Neutrality of Beijing Da XingWRI ChinaNational Center for Climate Change Strategy and International CooperationEnergy Research InstituteThe Administrative Center for China’s Agenda 21 (ACCA21), Ministry of Science and TechnologyChina Building Materials Federation (CBMF)China National Institute for StandardizationDeep RockDelong SteelShanghai GEIT Co.Renewable Energy Development Center, Energy Research Institute, NDRCSINOPECBaowuGreenovation: HubNational Development and Reform Commission (NDRC)Ministry of Industry and Information Technology (MIIT)Ministry of Ecological Environment (MEE)Shanghai GreenmentChina Beijing Green ExchangeChina Standardization AdministrationChina National Institute of StandardizationCNPC Research Institute of Safety and Environmental TechnologyClean Energy Research InstituteChinalconstitute for Climate Change and Sustainable Development – Tsinghua UniversityBiosphere 3Carbontrust ChinaChina Environmental United Certification CenterSinocarbon Interviews with Japanese StakeholdersMitsubishi Chemical Group CorporationNew Industry and Technology Development Organization (NEDO)Global Environmentally Conscious Research GroupSumitomo Osaka Cement Co.Climate Change Task Force DepartmentNational Graduate Institute for Policy Studies (GRIPS)Ministry of Economy, Trade and Industry (METI)Ministry of the Environment of Japan (MOEJ)Sumitomo Osaka Cement Co., LtdSumitomo Chemical, Co., Ltd.UACJ – AluminumResearch Center for Advanced Science and Technology (RCAST)JFE Steel CorporationMitsui Global Strategic Studies InstituteMitsui Chemicals, INCTaiheiyo Cement CorporationNEDO Representative Office in EuropeResearch Institute of Innovative Technology for the EarthThe Central Research Institute of Electric Power (CRIEPI)Waseda UniversityIGESGraduate School of Public Policies, REITI / University of TokyoToyota Motor CorporationJapan Aluminum AssociationNippon SteelMarunouchi Innovation PartnersShizen EnergyThe Institute of Energy EconomicsDaichi LifeMitsubishi Heavy IndustryCRIEPI Interviews with Korean StakeholdersPresidential Committee for Net ZeroKorea National Cleaner Production Center, Korea Institute of IndustrialTechnology (KNCPC/KITECH)Korea Institute for International Economic Policy (KIEP)Kim & ChangKB Kookmin BankNational Center for APEC Studies and the Pacific Economic CooperationCouncil at Korea Institute for International Economic Policy (KIEP)KIEP (Korea Institute for International Economic Policy)Center for International Development CooperationSeoul National University of Science and Technology (Seoultech)Korea Chamber of Commerce and Industry (KCCI)Korean Environmental Law AssociationKorean Institute of Energy Research CenterKorean Advanced Institute of Science & Technology & Solution for Our ClimateKorean Institute for Industrial Economics and TradeNational Assembly Research Service (NARS)Ministry of Environment (ROK)Ministry of Trade, Industry and EnergyKorean PresidencyPeople’s PartyKorea Environment InstituteKorea Chemicals AssociationKorea Energy Economic Institute (KEEI)Korean Cement AssociationKorea Testing & Research InstituteMinistry of Strategy and FinanceCarboncoDivision of International Studies of Korea University in KoreaYonsei UniversityCSDLAPYulchon LLCVEOLIA KoreaInternational School of Urban Sciences, University of SeoulPOSCO Research InstitutePOSCOEugene Corp Research InstituteSK ChemicalsSamsungKorea Cement Industry AssociationDelegation of the European Union to the Republic of Korea Interviews with European stakeholdersEuropean CommissionDG Grow, European CommissionDG Clima, ECDG Trade, ECDG Taxud, ECDG Energy, ECDG Grow, ECEEASFrench Ministry of Economy and FinanceFrench ministry of IndustryCleantech for EuropeInstitut du développement durable et des relations internationales(IDDRI)CEA (French Atomic Energy and Alternative Energies Commission)Institut MontaigneWuppertal Institute for Climate, Environment and EnergyBreakthrough EnergyEcocem Materials, Ltd.AFYRENArcelorMittalGerman Federal ChancelleryRenaultBMWKBMWAirliquideArdianMitsubishi Electric, FranceThe Boston Consulting Group FranceCopenhagen Infrastructure PartnerOPmobilityMEDEFKéaVICATOranoMinistry of Energy Transition, FranceAccenture FranceArchery Strategy ConsultingAirbusAccuracyHitachi Energy FranceGroupe AmundiChubb FranceBesséSGS, FranceEDFSchneider ElectricENEDISTotalEnergiesArcelorMittalEvolenSolvayThyssenkrupp Steel EuropeBASFEUROFER (European Steel Association)CembureauCEFIC (chemical federation)HolcimSiemensGTT (Gaztransport & Technigaz) SAAgora EnergiewendeThe Climate GroupL’Oréal GroupeIFP School / Laboratoire de Génie Industriel de CentraleSupélecAssociation française des Economistes de l’EnergieVUBCollege of EuropeIDDRIClean Hydrogen Joint UndertakingPlastic OmniumPergamonEngieE3GEnagasEnBWHy24SNAMClimate Leadership CouncilEuropean University InstituteEuropean Institute on Economics and the EnvironmentInternational Institute for Sustainable DevelopmentMinistry of Ecological Transition, ItalyDepartment for Business, Energy, and Industrial Strategy, UKAtlantic Council Global Energy CenterDepartment for Energy Security and Net Zero, UKResources for the FutureHydrogen EuropeTransformation FactoryJeantetSuezVulogHogan Lovells FranceBreakthrough EnergyWavestoneGide Loyrette NouelRTEABB FranceI4CEiQoNatural GrassFederal Ministry of Economy Climate Protection, GermanyCarbiosCimporAequilibriaGlobal Cement and Concrete AssociationADEMESecrétariat Général à la Planification écologique (France)Wupperthal InstituteH2 Green SteelFrench Ministry of Europe and Foreign AffairsSISThe Directorate General for Enterprise (DGE), Industry Service: IndustrialPolicies, FranceAdvisor to the Green Group at the European ParliamentAluminum DunkerqueDelegation of the European Union to the Republic of KoreaDelegation of the European Union to ChinaEDFAXAThyssenkruppGerman State Secretariat for EnergyAdelphiAgoraEnergiewende Other stakeholdersUNIDOOECDIEAInternational Organization for StandardizationClimate ClubWorld BankGlobal CCS InstituteRio TintoWorld Economic ForumInternational Sustainability Standard BoardIRENA Table of contents 1. 2. 3. Download Report part 1 - Shaping a Clean Industrial Strategy for Europe (204 pages) Report part 2 - Decarbonizing the Steel and Aluminum Sectors (174 pages) Executive Summary (30 pages) The EU faces tough choices. It has set itself the ambitious target of becoming climate neutral by 2050 and this will have profound implications for the future of EU industry. Industry, which is responsible for over a quarter of the world's greenhouse gas emissions, is a vital part of the EU’s economy and a key player in the path toward net zero by 2050. The EU must find a way to accelerate the decarbonization of its industry, while ensuring competition is not wiped out by industrial giants from China and the United States, which are aggressively positioning themselves to dominate tomorrow's carbon neutral economy.How can Europe pioneer the transition into the post-carbon era, while retaining, and even regaining, industrial competitiveness? This dual challenge is one of Europe's strategic priorities for the coming decades.The new European Commission wants to turn the European Green Deal into a Clean Industrial Deal. Some steps have already been taken, in the form of a Net-Zero Industry Act - but these are insufficient to meet the scale of the challenge. In addition, disparities between Member States are growing. To succeed, Europe needs a bold industrial strategy supported by joint funding to drive innovation and deploy clean technologies across the continent.This report provides a comparative analysis of the EU’s decarbonization policies with those of the industrial powers of Asia (China, South Korea and Japan). It is built on two main pillars:1) A roadmap for a bold and ambitious European industrial decarbonization strategy, drawing on practices rolled out in Asian countries. 2) A sector-based approach that focuses on the decarbonization of two crucial, high-emission industries: steel and aluminum.The results of this year-long research effort are based on almost 500 interviews and consultations with European and Asian political and industrial stakeholders, most of which were conducted as part of trips to Europe, Japan, South Korea and the United Arab Emirates during COP28. The report also draws on an international dialogue organized in Paris in January 2024, that brought together forty political and economic decision-makers from Europe, Japan and South Korea.Shaping a Clean Industrial Strategy for EuropeMajor ObstaclesEuropean industrial policy faces an uphill battle in its path towards carbon neutrality. It suffers from the EU’s fragmented governance, an absence of coordination between Member States, lack of strategic thinking and joint funding.It also faces an acute energy challenge, as decarbonizing Europe’s industry will require widespread access to clean and affordable energy sources. Europe's aging infrastructure and high energy costs risk delaying its climate transition and pushing industries away from Europe to relocate to regions with more competitive clean energy prices.Finally, technological uncertainties surrounding decarbonization could also impact Europe’s transition. Despite being a frontrunner in the race to climate neutrality, Europe risks falling behind in the global race if it chooses the wrong technologies. Industrial Decarbonization in Europe and Asia: Diverse Strategies, Key InsightsEurope and Asia are choosing different strategies to achieve carbon neutrality:China, with its state-led industrial policy, backed by massive industrial capacity and a dominant position in green technologies, is seeking to balance industrial growth and sustainability with controlling its decarbonization agenda for high-emission industries.Japan, through close collaboration between government and industry, is prioritizing R&D, notably in hydrogen. This partnership allows Japan to closely monitor international technological developments, but it also exposes it to energy dependencies..South Korea, led by its conglomerates, is making slower progress in the energy transition, focusing on hydrogen but remaining dependent on fossil fuels and counting on a second-mover advantage. The EU has introduced tools such as IPCEIs (Important Projects of Common European Interest) and the STEP platform to accelerate research into carbon neutrality and clean technologies, but these alone won’t be enough to meet its goals. To remain competitive in this global transition, the EU must develop a more flexible and cohesive industrial policy.This report puts forward seven key recommendations to help the EU equip itself with a bold and coherent strategy to reach industrial decarbonization by 2050, while remaining competitive on the global stage.7 Recommendations to Forge Europe's Post-Carbon Industry1 Establish common funding of €100 billion per year at the EU level through European Clean Industrial Bonds. In detail These bonds would be financed by anticipating the future carbon tax revenues (in place from 2028 onwards).2 Create a European Clean Industrial Strategy Agency by merging all existing EU policy instruments to structure and accelerate the green transition In detail This Agency would be responsible for: a. providing technological guidance in close collaboration with industry, b. coordinating European and national climate funds and mechanisms, c. providing a one-stop financing hub for European decarbonization projects.3 Support demand for European clean industrial goods, with a Made-in-Europe Green Public Procurement Policy. In detail 4 Use trade policy to support industrial decarbonization aims, by considering industrial scrap (such as steel or aluminum scrap) as a carbon asset and encouraging cooperation with regions and countries that share similar levels of climate ambition. In detail 5 Support industrial demand for electrification by facilitating coordination between Member States and anticipating the future impacts of increased demand on the grid. In detail 6 Adopt a Cross-Sectoral Technology-Hub Strategy to stimulate innovation and promote mutualization of clean electricity generation. In detail 7 Set new clean industrial standards based on two key principles In detail a. Break technology path dependency, so as not to exclude emerging technologies. b. Adopt and promote a product-based approach and accelerate the implementation of ecodesign regulations to ensure a uniform, high standard of environmental sustainability across the market.Decarbonizing Strategic IndustriesTo forge a post-carbon industry, Europe will need to adopt a sector-specific approach to meet the technological and regulatory challenges of each industry and take into account the characteristics of manufacturing regions.Sectors like steel and aluminum should be a key focus given their high carbon intensity and their significance for the post-carbon economy and energy transition.The Steel SectorSteel production accounts for 8% of global greenhouse gas emissions. Clean tech solutions such as hydrogen steelmaking, clean electrification, and carbon capture are emerging, but to be successful, they would need major investment and access to clean hydrogen and raw materials. Other technologies, such as molten oxide electrolysis, are promising and could change the economic balance of the sector in the post-carbon era.China, the world's leading producer, is taking a gradual, opportunistic approach to decarbonizing its steel sector, while retaining its dominant position. Japan and Korea, with more limited access to hydrogen and clean electricity, may need to explore other solutions and reduce their primary steel production-a path Europe may also need to consider.Decarbonizing steel in Europe will require public authorities and industry to:Adapt an average carbon intensity calculation within the Carbon Border Adjustment Mechanism (CBAM) to mitigate the risks of circumvention by exporting countries.Remove regulatory barriers for large-scale production of clean hydrogen, including hydrogen produced from excess nuclear energy.Prioritize steel for access to clean hydrogen.Promote circular economy practices to reduce dependence on hydrogen.The Aluminum SectorAluminum is critical to the post-carbon economy, especially for transport, energy and the environment. The sector’s carbon footprint (around 2% of global emissions) mainly depends on the electricity grid's carbon intensity.Clean electrification and inert anode technology are necessary to completely decarbonize the production of aluminum. With the right policies, aluminum recycling could also play a key role in the post-carbon economy.In Europe, decarbonizing aluminum requires a strong focus on clean electricity supply, support for technological innovation such as inert anodes, and measures to effectively combat carbon leakage. These include:Extending the European Carbon Border Adjustment Mechanism (CBAM) to the downstream aluminum sector and enhancing monitoring to ensure fair competition.Supporting research on and deployment of low-carbon technologies.Promoting green standards to ensure fair competition between decarbonized and non-decarbonized aluminum.Bridging the cost gaps by getting governments to support sizable public investments into industries producing premium green goods.Joseph DellattePrintShareDownload Report part 1 - Shaping a Clean Industrial Strategy for Europe (204 pages)Download Report part 2 - Decarbonizing the Steel and Aluminum Sectors (174 pages) Executive Summary (30 pages)related content HeadlinesOctober 2024Biodiversity and the Economy Birds of a FeatherBiodiversity, essential to the global economy, is under threat. Given the urgency of the situation, collective action is crucial. 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