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Modernising the EU’s industry is imperative: European steel, organic chemical and cement industries – “heavy industry” – rely 75 percent on fossil energy and feedstocks, exposing them to volatile markets.
At the same time, geopolitical tensions and global competition are disrupting the EU’s established business model. Yet clean technologies are ready for deployment at scale. They reduce dependence on fossil imports and open new markets, if the right investment conditions are created.
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By investing in technologies that use domestic renewable electricity, green hydrogen and sustainable biomass, EU heavy industry can break its fossil import dependence by 2050.
Compared to a fossil-dominant pathway, this largely shields the sector from 17 billion euros in extra costs triggered by a one-year fossil price shock similar in magnitude to the recent Strait of Hormuz closure. Such an approach costs the EU less than one percent of industrial gross value-added per year.
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EU heavy industry can remove more carbon dioxide from the atmosphere than it emits as early as the mid-2040s by increasing the use of sustainable biomass paired with carbon capture and storage (CCS).
These carbon removals contribute to the EU’s 2050 climate neutrality goal and provide a new revenue stream for industry to fund its modernisation. By contrast, using CCS primarily for fossil emissions risks locking industry into high residual emissions.
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To drive innovative industrial production, the EU should now develop an investment framework that maximises the use of domestic resources.
Securing the EU’s strategic sovereignty and its position in tomorrow’s green markets requires a comprehensive industrial strategy, including three bedrock measures: a robust carbon price signal via the Emission Trading System (ETS), rapid expansion of renewable electricity, green hydrogen and sustainable biomass and strong demand-side signals to stimulate offtake of clean products.
A strategic path for EU industry
Securing resilience of steel, chemicals and cement with renewable domestic resources
Summary
The EU's steel, cement and chemicals industry are strongly reliant on fossil energy and feedstocks, exposing them to volatile markets and geopolitical risks.
Clean technologies powered by domestic resources - such as renewable electricity, green hydrogen and sustainable biomass - are ready for large-scale deployment. They can drastically cut fossil imports while opening new markets and shielding industry from extra costs of fossil price shocks. Further, expanding sustainable biomass use combined with carbon capture and storage (CCS) allows EU heavy industry to become a net remover of CO₂ by the mid-2040s. This creates new revenue streams and supports the EU’s 2050 climate-neutrality goal.
Achieving this industrial decarbonisation requires a comprehensive strategy built on three pillars: a strong carbon price via the Emission Trading System (ETS), rapid scaling of clean energy and feedstocks and robust demand-side signals for green products through lead markets.
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A strategic path for EU industry
Securing resilience of steel, chemicals and cement with renewable domestic resources
