Ref. Ares(2020)5277096 - 06/10/2020
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Moreover, representatives of the energy intensive industries are involved with DG GROW in
the High Level Expert Group dealing with issues related to competitiveness and
decarbonisation. The three guests mentioned above are also members of the High Level
Expert Group on Energy Intensive Industries.
The position paper of the High Level Expert Group and the minutes of the last meeting held in
DG GROW on May 3 2018 are attached to this briefing. The expert group also submitted a
summary of each sector strategy; however it is more difficult to reach a common position (due
to, e.g., issues of material substitution).
Speaking points for opening statement
x Dear CEOs, dear Chairmen, dear Presidents, dear Member of Management Boards,
dear Director Generals, dear participants, dear colleagues,
x Before the introductory remarks of Commissioner Miguel Arias Cañete, let me
welcome you to this high-level brainstorming event having this informal exchange
with you is part of our efforts towards a cost-efficient decarbonisation of our
economy.
x However, let me clearly state that the benefits of the energy transition go beyond the
decarbonisation challenge. It is a great opportunity for greater energy security,
competitiveness, investments, growth and jobs as well as improved living conditions
and comfort.
x And we know that this is possible! From 1990-2016, CO2 emissions decreased by
23% while GDP grew by 53% showing the successful decoupling between economic
growth and CO2 emissions.
x Investments in renewables and energy efficiency as well as in the modernisation and
integration of European energy markets, are essential for the decarbonisation of EU
economy. But most importantly for the creation of growth and jobs all over Europe,
and for the Union's global competitiveness, as the technological advantage these
investments sustain will be essential for Europe’s industry.
x A stable and performant regulatory framework is key to channeling such investments,
and the EU is the most advanced in this respect, thanks to the
Clean Energy for All
Europeans proposals for which the inter-institutional negotiations are quickly
progressing. What is needed next, is a strategy to reinforce the industrial basis
underpinning the clean energy transition.
x The energy transition and a strong EU industrial base are mutually reinforcing: the
energy transition creates new opportunities for the industry, in particular in the
construction and engineering sectors. At the same time, many industrial sectors can
contribute to the energy transition through more efficient use of energy, production of
equipment and innovative solutions to curb emissions, improving thus also EU
industry's global competitiveness.
x Energy Intensive Industries are and will always be playing a crucial role in this
context:
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x
The sector represents an important part of the European economy and the steel
and aluminium sector alone employ more than half a million people in the EU.
x
Today, Energy Intensive Industries consume approximately 16% of the EU
total final energy consumption.
x
They also face higher share of energy costs in their production costs (10% as
compared to 3% on average).
x In a rapidly evolving energy and industrial landscape, the EU will defend existing
industrial capacity in Europe to deliver durable high-quality products, corresponding
to the highest safety standards relevant for the wider economy (in sectors such as steel,
aluminium, copper, chemical / petrochemical products, automobile industry,
refineries, etc.).
x Europe should be capable to make the best products which contribute to reducing
emissions while creating growth and jobs and being competitive at global level thanks
to improved energy efficiency and synergies stemming from a broader deployment of
innovative low carbon technologies.
x The Commissioner Miguel Arias Cañete will now give introductory remarks.In the
meantime, please enjoy your breakfast.
***
x Decarbonisation of the European economy will not happen in isolation, but rather in
the context of meta-trends that will reshape the world economy. Examples of these
trends are: the ageing population, digitalisation, shifting of the global centres of
gravity.
x As an example of these meta-trends, China increased steel production by more than
85% between 2007 and 2015. Imports of aluminium from China to the EU increased
by approximately 52% between 2008 and 2014. In the meanwhile, following the
recession of 2009 production of both steel and aluminium decreased in the EU with
only a weak recovery in the following years.
x However, in the context of global economic growth, we expect the value added of the
industrial sector in the EU to keep increasing until 2050. As the industrial sector
continues to expand, energy intensity will further decrease. In 2050, it will take half
the energy needed in the year 2000 to produce the same value added. On the other and,
industry will use almost one quarter more electricity in 2050 compared to 2000.
x The LTS will set out our vision for a decarbonised Europe in a changing world.
Contributions to the LTS
x Every sector of the economy will contribute to the LTS starting with the power sector
that will be the first to decarbonise.
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x The vision for Europe's industry will be based on your input. We look forward to a
fruitful cooperation with you using the channels already established (for example, the
High Level Expert Group on Energy Intensive Industries). Special attention should be
given to complementary concepts such as the circular economy and bio-based
economy.
x A similar inclusive approach will be used to compile the visions for the other sectors:
services, agriculture, transport.
Enabling factors
x Several different elements need to be considered to put the strategy in place:
1. A clear strategy is needed to support innovation by pooling resources. This is
particularly relevant for industry as new technologies will be needed to
decarbonise some industrial processes.
2. Investments will be substantial and the analysis prepared by the Commission
will help quantify the needs. It will then be necessary to explore intelligent
ways of financing the transition and to avoid overstretching public and private
finances.
3. Public finance can play a strategic role in leveraging and focusing private
investments.
4. Trade and geopolitical issues should be taken into account, e.g., to avoid unfair
competition. Decarbonisation will reduce Europe's dependence on fossil fuels,
but scarcity of other raw materials may become an issue.
Questions to frame the discussion:
x What are the main meta-trends (ageing population, digitalisation, shifting of the global
centres of gravity) that will affect the European industry in the coming decades. How
will these meta-trends interact with the Paris-compliant long-term Decarbonisation?
x We anticipate a coupling between power generation and final energy demand sectors.
Industry, for example, benefits from the decarbonisation of the power system. What
are the main opportunities and hurdles of increased sector coupling?
x The Long-Term Strategy will shed light on the main technological gaps for
decarbonisation of industry. What are the main gaps that you see, technological, but
also regulatory?
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Defensive points:
How can the European Union guarantee a level playing field for the European Industry in the
context of decarbonisation?
A level playing field can be assured by promoting global climate action. The Paris Agreement
is also an international treaty establishing commitments on ratifying parties according to their
level of development. Finally, proactively leading the energy transformation is the best way to
ensure a competitive advantage.
How can industry inform the vision for the LTS?
The Commission is stepping up its effort to gather stakeholders input for developing an
inclusive vision for the Long-Term Decarbonisation strategy. Industry can provide inputs in
several ways, notably via the upcoming public consultation and through the platform of the
High Level Expert Group on Energy Intensive Industries. Officers from Dg ENER working
on the LTS will be directly involved in the works of the High Level Expert Group. But having
in mind the deadlines, we need input quickly.
How can industry get advice/information from the Commission on issues related to the LTS
(such as long-range forecasting,…)?
The Commission is stepping up its efforts to disseminate assumptions and background
information relative to the preparation of the LTS. Making sure that each stakeholder receives
the relevant information can be a difficult task. I recommend you to reach out to Commission
staff through established platforms such as the High Level Expert Group.
Minutes of the meeting of the Commission High Level Expert Group on Energy
Intensive Industries (EIIs):
3 May 2018
Brussels, 4 May 2018
Minutes
chaired the meeting with industry associations and DGs ENER, CLIMA, RTD,
ENV, GROW and the SG (list of participants attached) on the work to develop a consolidated
2050 strategy for the EU’s energy-intensive industries, which should contribute to the EU’s
low emission strategy for 2050.
Discussion
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Then chair took stock of the latest meetings. He asked the EIIs to present their work so far and
explained that the purpose of this meeting was to see what questions the EIIs had for the
Commission services and vice versa.
On behalf of the EIIs
presented their discussion paper (attached), noting the
importance of EIIs at the heart of value-creation in Europe. EIIs have already made major
efforts to reduce their carbon intensity and are quickly approaching the technical limits of
current technologies. Further significant emission reductions will require transformational
changes as well as the development and deployment of innovative technologies and solutions,
which all sectors are actively working on. The full investment costs of the transition would
require up to four-digit billion of Euros. This is an unprecedented challenge within a relatively
short time horizon. Energy, feedstock and infrastructure represent another essential pre-
requisite to support the industry transition. The strategy should be sufficiently flexible and
address also the international dimension, taking into account the emission reduction
contributions of extra-EU countries. This is essential to ensure the environmental integrity as
well as the competitiveness dimension of the strategy.
EIIs sectorial low-carbon roadmaps, visions and pathways have identified, among others, the
following key CO2 abatement options:
•
Energy and Materials Efficiency
•
Increased use of low-carbon and carbon-neutral energy sources (electricity, hydrogen,
bioenergy)
•
Alternative feedstock including carbon (Carbon Capture and Utilisation), waste,
secondary raw materials and bio feedstock
•
Integrated process management
•
Carbon Capture and Storage
•
New materials and products
The identified abatement options will require significant availability of:
•
Secure and affordable low-carbon and carbon-neutral energy carriers (electricity,
hydrogen, bioenergy),
•
Feedstock and raw materials (biomass, CO2, gas, hydrogen, alternative materials and
fuels),
•
Infrastructures (e.g. electricity networks, hydrogen grid, CCS pipelines and storage)
•
Evolution of energy prices will affect abatement choices. In the scenario of highest
electricity uptake by 2050, our sectors could require an additional amount of electricity (four-
digit TWh), which is more than the whole electricity supply estimated by the IEA (IEA World
Energy Outlook 2015, 450 ppm scenario).
The enabling regulatory framework would have to address the following main elements:
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•
Ensure industrial competitiveness by addressing direct and indirect costs caused by the
lack of an international level playing field, in particular in the field of climate, energy,
environmental and trade policies.
• Secure
public
financing
in
industry
research and innovation at EU, national and local
level, to upscale technologies to commercial level, to support their market uptake and to
address the first mover disadvantages as well as the impact on the value of existing assets
•
Secure supply of competitively priced, carbon-neutral energy. This includes:
Develop a comprehensive strategy for the development of a full range of low-
carbon
and carbon-neutral energy carriers and related infrastructures and storage
Ensure
an
adequate
regulatory
framework for Power Purchase Agreements
(PPAs)
and long-term power contracts
Value industry’s role in balancing the profile of electricity markets
•
Promote industrial symbiosis and circular economy, via:
Developing a raw and secondary materials strategy
Securing a proper accounting of CO2 emissions across sectors and value-
chains
•
Stimulate the market uptake of low-carbon, innovative products and solutions.
Individual EIIs expressed the need for inputs from the Commission services on overall
landing zones (GDP forecasts, etc.) and in particular availability of key resources (energy,
etc.). They also asked for advice on long-range forecasting, regional mapping of industry,
infrastructure and CCS potential as well as on depreciation of existing assets.
The Commission services (CLIMA, ENER, GROW) indicated that it would be useful if the
EIIs input to the 2050 strategy addressed the following elements:
Latest
sectorial
roadmaps
individual technologies that could be used
information on sectorial interactions
Key challenges and opportunities
Key
bottlenecks
Resource/material efficiency and circularity as vectors for decarbonisation
potential for value chains that would reduce investment costs
shift from product production to services with product dimension
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non-energy raw materials needs
(RTD) mentioned the Commission’s recent MFF proposal,
which foresees an allocation for Horizon Europe of 100b EUR, a major increase on H2020.
This would include a strong industrial focus. Regarding foresighting, RTD proposed to look
into the existing studies by RTD on 2050 and the Bohemia study.
(ENV) noted that 2050 should envisage a circular economy world, asked
EIIs to incorporate other aspects such as product lifetime extension policies and asked EIIs to
reflect on what policies Commission should pursue internationally.
The chair addressed the timing, i.e. by November the Commission intended to present a
strategy for discussion with stakeholders, but this is part of a process that would lead to the
EU presenting its strategy by the 2020 deadline set in the Paris Agreement. This meant that
the Commission services would prefer to receive a first consolidated and sectorial input by the
summer, which would be discussed with other EII HLG stakeholders after the summer. The
Commission services would already like to see the raw data being collected by the EIIs,
recognising that it was based on differing underlying assumptions. The collective work would
need to continue after this initial phase.
He noted that it could be useful to involve the electricity, hydrogen and waste sectors once the
EII work was more advanced. He also indicated that DG GROW planned to extend its
interservice group to cover those services responsible for inter alia investment, trade,
competition and regional policy.
Next steps
•
GROW to send minutes with participation list and latest version of a summary of the
EIIs’ existing 2030/2050 roadmaps (Annex II).
• EIIs
to
provide
individual
roadmaps
and further sectoral information as soon as
possible.
•
DG RTD to provide information on foresighting as soon as possible.
• Extended
interservice
meeting
(Commission
services only) including the core group
and ECFIN, FISMA, COMP, TRADE, JRC, REGIO, EMPL, MOVE and EPSC (early June).
• Follow-up
meeting
involving EIIs and core group of Commission services (late June)
Overview of the Steel sector:
The steel industry is an energy-intensive industry, consuming three main energy carriers,
ranked in the following order: coal, natural gas and electricity. Total crude steel
production in the EU-28 amounted to 166 million tonnes in 2015. In 2015, six countries
– Germany, Italy, France, Spain, the United Kingdom and Poland – accounted for more
than two-thirds of total EU crude steel production.
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In 2016, the European steel industry directly employs 335,000 people. In general,
approximately 218,000 people are employed by large steel producing companies.
The steel sector is characterized by economies of scale and scope, and achieving
economies of scale for new producers requires mass production of steel. Therefore, along
with new technologies and the privatisation of major European steel industries in the
1990s, a wave of takeovers and mergers occurred. As a result of the consolidation in the
European steel industry relatively few companies account for a large share of steel
production.
Steel production in the EU decreased by roughly 21% between 2007 and 2015, Asian
countries, especially China, increased their production by more than 85% over the same
period, satisfying both internal and external demand. Between 2008 and 2009, steel
production dropped by roughly 30% in the EU and North America, and underwent a
weak recovery in the three following years. After Asia, the global leader with a share in
2015 of 68% global production, the EU ranks second (10%), followed by North America
(7%) and CIS (6%). The EU, North America, CIS and Asian countries account for more
than 90% of world steel production.
Figure 1 Crude steel production, 2001-15 (million tonnes)
EU trade in iron and steel is still – though to a lesser extent than pre-2012 – represented
by intra-EU flows. In 2012, intra-EU trade accounted for 72% of total trade, while only
28% of trade was directed towards extra-EU economies. The same trend is observed with
regards to imports: 74% of imports comes from the EU and 26% from outside EU
borders.
Figure
2 shows the export and import trade volumes of EU basic iron, steel and ferro-
alloys products. In 2014, the EU exported the largest volumes (roughly 5 million tonnes)
of iron and steel to Turkey and the United States.
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Figure 2: EU export and import volumes of basic iron, steel and ferro-alloys with the 10
most relevant G20 countries (in terms of volume) from 2008 to 2014
The competitiveness of the EU steel industry is highly affected by exchange rates. When
the euro appreciates significantly (such as in 2006-07), exchange rates put a lot of
pressure on the EU steel industry. Moreover, the European steel industry has been facing
since several years an unprecedented wave of distorting trading practices.
Overview of the Aluminium sector:
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In 2012, 2.1 million tonnes of primary aluminium and 4.1 million tonnes of secondary
aluminium were produced in the EU-27. In 2015 primary aluminium production was
slightly higher at 2.2 million tonnes. The largest energy input (and one of the larger cost
components) in the production of primary aluminium is by far electricity, followed by
fossil fuels. Aluminium can also be recycled indefinitely to produce secondary
aluminium.
As of the beginning of 2016, there were 16 primary aluminium smelters active in the EU,
run by 10 different companies. The secondary aluminium plants located in the EU
amounted to 209. The aluminium industry is the largest of the non-ferrous metal
industries in the EU directly employing a workforce of around 255,000.
The total production value of aluminium dropped in all Member States in 2009, with
only Poland and Germany showing significant growth between 2010 and 2014.
Production values in Member States such as Greece, Italy and Spain have not yet
recovered from the crisis, though all grew slightly between 2013 and 2014.
The EU is a net importer of aluminium and net-imports account for 54% of all aluminium
processed in the EU. Over 87% of imports of aluminium wires in 2013 came from just
three countries: Iceland (70.000 tonnes), Norway (59.000 tonnes) and Russia (57.000
tonnes).
Table
1 and Table
2 show two snapshots of the trade between the EU and the rest of the
world in aluminium products; one for 2008 and one for 2014. It is clear that the EU is a
significant net importer, though the gap between exports and imports has narrowed
somewhat since 2008. The export values in Table 39 show three main export markets
that account for over 35% of total exports: Switzerland, USA (13% of total export by value
in 2014) and China. These three countries also figure in the list of main importers to the
EU (with 4.3% of total imports coming from the USA).
Table 1: Exports of aluminium and articles thereof between the EU and main trade
partners (2008, 2014, in USD), sorted by export value in 2014 2008 201
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Table 2: Imports of aluminium and articles thereof between the EU and main trade
partners (2008, 2014, in USD), sorted by import value in 2014
Energy costs for Energy Intensive Industries such as steel and aluminium
Energy costs play a modest role in the total production value of the economy in Europe (a
bit more than 2% for industry, less than 2% for services).
Energy cost are however important for energy intensive industries (~2% of the GDP; with
steel and aluminium representing together 0.21% (0.15% steel and 0.05% aluminium)),
specifically in segments of these industries exposed to international competition such as
primary steel, primary aluminium, refineries, etc.
The 2016 energy prices and costs reports report shows that energy costs represented on
average 5-20% of production costs for energy intensive industries (~ 8% for steel and
aluminium)[1] and that some years in some industries can reach up to 40% of the
production costs (27% in some cases for steel).
This justifies the need for compensatory measures for these industries to ensure a level
playing field (free ETS allowances, State aid for indirect cost of electricity).
[1] Note that the sector statistics include firms producing steel products with different value added and
following different production processes (e.g. BF or EAF). The averages of the sector represent the
industry as a whole and might not be fully representative of concrete processes in the sector, which
may have different sensitiveness to energy cost
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Figure 4 Absolute and relative changes in main production cost components for iron and
steel sectors (2008-2013 and 2011-2013)
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