Europe's Path to Reducing Emissions While Maintaining Economic Growth
Europe aims to clean up its heavy industries without sacrificing jobs and economic growth. A new study shows that this is possible, but it will require compromises.
Researchers from the Euro-Mediterranean Center on Climate Change, the Polytechnic University of Milan, and the Technical University of Berlin argue that Europe can significantly reduce industrial emissions without losing its manufacturing base.
The cheapest way to achieve this goal may involve importing some of the most energy-intensive materials, which will then be used in European factories to produce higher value-added products.
To understand how Europe can achieve this, scientists modeled the production of steel, cement, and chemicals up to 2050.
According to their calculations, steel and chemical production can be organized with much less fossil fuel use.
Under the strictest target scenarios, which assume a 90% reduction in greenhouse gas emissions by 2040, most steel, ammonia, and methanol should be produced using “green” hydrogen derived from renewable electricity.
Metallurgists will increasingly use recycled scrap metal and shift many processes to electricity instead of coal and gas.
Cement production is more complex. Carbon dioxide is released during its production even when using clean energy. The authors believe that capturing emissions at cement plants can reduce the amount of CO₂ entering the atmosphere, although critics note that this technology has not yet proven effective on a large scale.
However, eco-friendly production does not come cheap.
The highest costs of the transition will be required around 2040, when European industry will face the need for significant investments in infrastructure and equipment. By 2050, costs will decrease, but Europe will still lag behind regions with cheaper renewable energy.
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One option is to locate facilities where renewable electricity is cheaper. In the model where companies were allowed to relocate production, it was moved to Spain, the Nordic countries, and the UK, where affordable renewable energy reduces electricity costs.
However, these calculations do not account for the costs of relocating factories, building new infrastructure, finding labor, and restructuring existing supply chains, so the savings turn out to be conditional.
The authors emphasize that this is merely a guideline for potential savings, not a forecast of what the industrial map of Europe will look like.
Researchers also proposed a more budget-friendly scenario. Importing some of the most energy-intensive materials, such as ammonia and methanol, yields greater savings than relocating production within Europe. This way, companies can retain subsequent stages of production at existing European facilities.
By 2050, under this scenario, almost all ammonia and methanol will also be imported, allowing Europe to produce about 25% less “green” hydrogen.
However, relying on imports comes with its own risks. The study does not account for wars, pandemics, and other large-scale disruptions that could disrupt international supply chains. Europe has already felt how vulnerable they can be.
This year, the conflict in the Middle East interrupted oil, gas, and fertilizer supplies. At the same time, the reduction of Russian gas supplies after the invasion of Ukraine triggered a sharp rise in energy prices and forced several European factories to cut production volumes.
Scientists emphasize that fossil fuels come from a limited number of suppliers through rigidly tied infrastructure like pipelines, while “green” iron, ammonia, and methanol can be supplied from any region with cheap renewable energy.
Moreover, the supply chains differ. The fossil fuel supply chain is inherently linked to emissions, while the supply of iron or ammonia can be gradually decarbonized.
Furthermore, the alternative to imports does not mean true independence, they add. Producing everything needed within the EU is what inflates subsidy costs to over €200 billion per year. Dependence that can only be avoided through constant government support hardly seems more reliable.
Attempting to boost European industry without relying on imports could prove very costly. In the most expensive scenario modeled by the authors, Europe would need to allocate about €235 billion annually to cover the difference between European production costs and import prices.
“Europe needs to realistically assess its capacity to expand heavy industry,” says Massimo Tavoni, co-author of the study.
“The priority should be decarbonization and maintaining existing production capacities, supported by targeted, time-limited government support and sensible use of “green” imports.”
