11 May 2021 - While the clean production, efficient use and recycling of basic materials are essential to make European industry climate neutral, a joint study by Agora Energiewende and CLG Europe published today exposes the barriers that still hold back demand for climate-friendly goods.
Demand for climate-friendly products such as recycled plastic goods or hydrogen-based steel production is weak because of a lack of market incentives. However, the right market conditions are prerequisite for a successful transformation to a climate-neutral industry.
Based on in-depth interviews with leading European companies from various industrial value chains, including Unilever, Coca-Cola European Partners, HYBRIT and Volvo Cars, the report highlights different options available for decisionmakers to craft a well-targeted package of policies to lead the European Union towards carbon neutrality by 2050. The new report suggests a range of actions including embedded CO2 limits for consumer products, and reporting requirements and CO2 labelling for basic materials.
Patrick Graichen, Executive Director, Agora Energiewende said: “The European Union needs to urgently create the conditions necessary to accelerate the industrial transformation if it wants to become carbon-neutral by 2050. And it has only one investment cycle left to do so. In that context, our study shows how crucial it is to create market incentives for climate-neutral materials."
Tomorrow’s markets today: Scaling up demand for climate neutral basic materials and products shows how policies can create incentives for customers to buy and use climate-neutral materials in a way that can help industry cover the costs of decarbonising the production of basic industrial materials such as cement, iron and steel, and basic chemicals.
Eliot Whittington, Director, CLG Europe said: “The EU is one of the biggest single markets in the world and a world leader in clean and efficient technology. There’s a huge opportunity to use that market pull to drive investment and innovation at a global level – accelerating the race to net zero and driving the transformation of key industrial sectors. This report shows how this opportunity can be seized through well-targeted, thought-through EU policies.”
In addition, the study reveals limited access to high-quality data on the carbon content of these materials is also a major concern for the companies interviewed. Yet, good data is essential for downstream manufacturers and consumers to compare the carbon content of materials accurately, and thus make more climate-friendly choices.
The report emphasises that certain policies to create demand for climate-neutral industrial products can also help to drive a range of low-carbon solutions, such as manufacturers using carbon-intensive materials more efficiently or using increased shares of recycled materials as inputs. The production and use of basic materials is one of the main contributors to climate change, accounting for approximately 16% of annual net CO2 emissions in the EU in 2017 and around 20% of global CO2 emissions.
Last March the European Commission presented a new Industrial Strategy and Circular Economy Action Plan, as part of the European Green Deal, in which it announced a Sustainable Product Policy Initiative. The related legislative proposals are to be presented by the end of the year.
With this legislative package in mind, Agora Energiewende and CLG Europe have identified three broad, and mutually-reinforcing policy priorities for EU policy makers to scale up market incentives for climate-neutral materials:
- Setting embedded CO2 limits on final material-rich consumer products, like construction projects, vehicles and packaging.
- Developing reporting requirements and CO2 ratings labelling of key value chains and basic materials, to improve data availability, quality and comparability.
- Deploying targeted, temporary lead market measures such as public procurement, to promote use of underutilised recycled materials or innovative zero-carbon materials.
Peter ter Kulve, President of Home Care, Health & Wellbeing, Unilever said: “CO2 emissions from materials are significant, rising and simply can’t be ignored anymore. We hope this report encourages everyone to tackle hard-to-abate emissions from materials and invite policy makers to create policies favourable to the emergence of climate-neutral materials and products.”
Joe Franses, VP of Sustainability, Coca-Cola Europacific Partners said: “Policy action to boost beverage packaging collection rates across Europe and drive investment in emerging recycling technologies can further enable the transition away from virgin fossil-based plastic, in support of the EU targets on emissions reduction and climate neutrality.
“We have an ambition to create a low carbon, circular economy with zero waste for the packaging we use, where 100% of our packaging is collected to be recycled or reused. We are accelerating our use of 100% recycled or renewable content in our plastic bottles and alongside, supporting greater collection of plastic packaging via deposit return schemes and the scaling up of innovative technologies to recycle it.”
Andreas Regnell, Senior Vice President, Head of Strategic Development Vattenfall and Chairman of the board HYBRIT said: “EU policy action that supports the creation of markets for climate-neutral basic materials is important to enable the necessary investments. Customer demand is growing – but need to be stimulated further by concrete policy actions as proposed in the report from CLG Europe and Agora, such as transparent market product emissions data and first investment support.
“We are very proud that SSAB, LKAB and Vattenfall together in HYBRIT have decided to take a decisive step to scale up and demonstrate an industrialised value-chain for fossil-free steel by 2026.”
Harry Verhaar, Head of Global Public & Government Affairs and chair of CLG Europe said: “While it is encouraging to see the increase in reduction commitments and progress on operational carbon, this report shows the relevance of stepping up our collective efforts to reduce embedded carbon. The combination and interplay of both is needed in our journey to net carbon neutrality. We hope this report will serve as a springboard for enhanced collective action, which will also drive innovation in support of Europe’s competitiveness.”
Claire O’Neill, Managing Director, WBCSD said: “Progressive industrial companies are already working across entire value chains to foster demand for climate neutral basic materials and final products. To accelerate this transition, EU policy must aim to harmonize incentives and data across the internal market.”
‘Tomorrow’s markets today: Scaling up demand for climate neutral basic materials and products' will be launched on May 11, 2021 at a high-level virtual conference 'Creating markets for climate neutral materials and the role of the EU industrial policy' with speakers including:
- Peter Altmaier, Federal Minister for Economic Affairs and Energy, Germany
- Diederik Samsom, Head of Cabinet for First Vice-President of the European Commission, Frans Timmermans
- Maria Spyraki, Member of the European Parliament
- Magali Anderson, Chief Sustainability and Innovation Officer, LafargeHolcim
- Thomas Ingenlath, Chief Executive Officer, Polestar
- Peter ter Kulve, President of Home Care, Health & Wellbeing, Unilever
- Lars Völkel, Executive Vice President, Wood Products Division, Stora Enso
- Claire O’Neill, Managing Director, Climate & Energy, WBCSD
- Dr. Patrick Graichen, Executive Director, Agora Energiewende
- Dr. Oliver Sartor, Senior Advisor, Agora Energiewende
- Dr. Martin Porter, Senior Strategic Adviser to CLG Europe and Executive Chair in Brussels for CISL
- Eliot Whittington, Director, CLG Europe
Download Tomorrow's Markets Today: Scaling up demand for climate neutral basic materials and products
About Agora Energiewende
Agora Energiewende is a think tank that develops evidence-based and politically viable strategies to advance the goal of climate neutrality in Germany, Europe, and the rest of the world. We inform policymakers, economists, researchers, and civil society while encouraging a productive exchange of ideas. Our policy proposals are practical and free of prior ideological commitments. We are a non-profit organisation funded by foundations and public institutions and hence are beholden neither to business nor to politics. Our exclusive mission is to serve the climate.
About European Corporate Leaders Group (CLG Europe)
CLG Europe is an influential and diverse group of European businesses driving leadership on measures to deliver climate neutrality. Members include: ACCIONA, Ball Corporation, Coca-Cola European Partners, DSM, EDF, Ferrovial, Iberdrola, Ingka Group | IKEA, Interface, Microsoft, Salesforce, Signify, Sky, Stora Enso, the ROCKWOOL Group, Unilever and affiliate members are Anglian Water, Eneco, HYBRIT, Lloyds Banking Group, Tesco and Thames Water. CLG Europe is a founder member of the We Mean Business coalition
