Speeding up the decarbonisation of European industry. Assessment of national and EU policy options

Under the Fit for 55 package of the European Commission, industry needs to reduce their carbon emissions drastically and become carbon neutral as soon as 2040. In this study we investigate if the EU ETS alone could deliver such reduction or whether additional policy measures are required.

The study shows that so far the EU ETS has not resulted in GHG reductions in industry: prices remained below required price levels, emissions stabilised and carbon efficiency of industrial production did not improve. It is therefore necessary that auxiliary instruments will be developed to help industry decarbonise rapidly. In this study, we have investigated a limited number of options, such as:

  • Price floors such as the CO2 price floor in the Netherlands
  • CO2 taxes on emissions that are nowadays still largely allocated for free and recycling the money for low carbon investments in industries
  • Phase out of carbon-intensive production routes in e.g. iron and steel and cement sectors
  • Public-Private Partnerships for technology development and scale up
  • Making free allowances conditional on low-carbon investments
  • Carbon contracts for differences

Each of these options could be attractive in order to assure that EU industry will start to decarbonise and remain competitive in the long run.