Climate & Industry

Climate & Industry

European Union

The European Green Deal, presented by the European Commission President in December 2019, outlines Europe’s vision to achieve net zero emissions by 2050. Proposing policies and overarching targets for emissions reductions, the EU Green Deal provides a ‘growth strategy’ for every major aspect of the European economy from energy to food, transport to manufacturing and construction as well as goals to halt biodiversity loss and reduce pollution.

This ambitious policy agenda aims to transform the European Union from a high to low carbon economy by boosting European industry competitiveness and encouraging private sector investment, while ensuring a fair and inclusive transition for workers in the regions affected.

Major policy areas of the EU Green Deal are:

Europe’s ‘Green Recovery’ Plan

The Next Generation EU plan proposed on 27 May 2020, sets out a stimulus package of EUR750 billion of loans and grants that places climate change at the centre of Europe’s post-pandemic economic recovery. Priority sectors identified for investment include a ‘renovation wave’ for building energy efficiency and green heating, acceleration of renewable energy and green hydrogen, clean mobility and the transition to a circular economy. These funds are additional to EU’s long term €1.1 trillion multiannual financial framework (MFF) for 2021 – 2027, which was adopted by the European Council in December 2020.

A summary of the key programs and instruments proposed to support the Recovery Plan can be found here. Key facts and figures about the NextGenerationEU and the MFF can be found here.

Recently proposed and launched key policy directives and strategies under the EU Green Deal include:

  1. EU Green Deal
  2. European Sustainable Investment Plan (presented in January 2020)
  3. Just Transition Mechanism (presented in January 2020 and endorsed by EU ambassadors in December 2020)
  4. EU Climate Law (provisional agreement, April 2021)
  5. European Climate Pact (presented in March 2020)
  6. European Industrial Strategy (adopted in March 2020)
  7. Circular Economy Action Plan (adopted in March 2020) 
  8. EU Biodiversity Strategy for 2030 (presented in May 2020)
  9. ‘Farm to fork strategy’ (presented in May 2020) 
  10. EU Strategies for Energy System Integration  (adopted in July 2020)
  11. EU Hydrogen Strategy (July 2020)
  12. 2030 Climate Target Plan (55% greenhouse gas emission reduction target endorsed by EU Council in December 2020)
  13. Renovation Wave (presented in October 2020)
  14. Methane Strategy and Chemicals Strategy for Sustainability (both presented in October 2020)
  15. Offshore renewable energy (November 2020) 
  16. Sustainable and Smart Mobility Strategy (December 2020) 
  17. New European Bauhaus (launched in January 2021) 
  18. New EU strategy on adaptation to climate change (adopted February 2021) 
  19. Organic Action Plan (March 2021) 
  20. Zero pollution Action Plan (adopted in May 2021) 
  21. Sustainable blue economy (presented in May 2021) 

In July 2021, the European Commission adopted a package of proposals to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The legislative tools in this “Fit for 55 package” to deliver on the targets agreed in the European Climate Law include:

  1. Emission Trading System Scheme (proposed in July 2021)
  2. Effort Sharing Regulation (proposed amendment to Regulation (EU) 2018/842, July 2021))
  3. Revision of the Regulation on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry (proposal, July 2021)
  4. Amendment to the Renewable Energy Directive to implement the ambition of the new 2030 climate target (proposal, July 2021)
  5. Proposal for a Directive on energy efficiency (recast, proposed July 2021)
  6. Amendment of the Regulation setting CO2 emission standards for cars and vans (proposal, July 2021)
  7. Revision of the Directive on deployment of the alternative fuels infrastructure (proposal, July 2021)
  8. ReFuelEU Aviation and FuelEU Maritime (proposal, July 2021)
  9.  Revision of the Energy Tax Directive (proposal, July 2021)
  10. Carbon Border Adjustment Mechanism for selected sectors (proposal, July 2021)

Australia

Australia’s first National determined contributions (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) includes an economy-wide target to reduce greenhouse gas emissions by 26 to 28 per cent on 2005 levels by 2030. Australia will submit its next NDC, with a post–2030 target, to the UNFCCC in 2025.

For information on Australia’s climate change strategies and on how it is meeting its international climate change commitments, check the Department of Industry, Science, Energy and Resources webpage.

Australia’s Technology Investment Roadmap will be a core element of delivering on these targets. The First Low Emissions Technology Statement released in September 2020 outlines five priority low emissions technologies and stretch goals to make the technologies cost-competitive with current alternatives, for example ‘clean’ hydrogen production, low carbon materials such as steel and aluminium, energy storage, carbon capture and storage and soil carbon.

A more comprehensive overview of Australian climate change policies, schemes and initiatives can be found here, and a review of the Climate Change Policies 2017 can be found here.

Key Australian climate policies, schemes and programs include:
  1. Australia’s National Hydrogen Strategy
  2. Clean Energy Innovation Fund
  3. Australian Renewable Energy Agency
  4. Clean Energy Regulator
  5. Climate Solutions Fund & Emissions Reduction Fund
  6. National Climate Adaptation and Resilience Strategy 2015

Trade & Sustainable Development

Trade & Sustainable Development

The EU Green Deal references the role of EU trade policy as a platform to engage trading partners on climate and environmental action. As the world’s largest single market, the EU is able to set standards that apply across global value chains and to shape international standards in line with EU environmental and climate ambitions, facilitate trade in environmental goods and services and support EU and global markets for sustainable products. Other EU sector-specific policy initiatives that have trade related implications but are not directly related to trade agreement negotiations, can also elevate environmental standards through trade.

The European Union has since 2006 included Trade and Sustainable Development (TSD) Chapters in trade agreements to leverage sustainable development and inclusive growth. These chapters commit both parties to implement multi-lateral environmental agreements to which they are party, and to ratify and implement fundamental ILO conventions.

The TSD chapters create a monitoring committee and a consultative domestic advisory group comprised of key stakeholders from business and civil society including trade unions and environmental and other organisations. If a party to the agreement considers the other is breaking its TSD commitments, government-to-government consultations can be initiated with a view to resolving the problem. If this fails, a panel of three independent experts can be convened to determine whether a party is in breach of its obligations and suggest ways to resolve the issue. However, EU TSD chapters are not subject to enforceable dispute settlement procedures and nor are there financial penalties for non-compliance.

Sustainability Impact Assessments (SIA’s) are undertaken to analyse the potential economic, social, human rights and environmental impact of as part trade agreements being negotiated by the European Union. Based on wide-ranging consultations of stakeholders in the EU and the partner country and analysis of the changes likely to be caused by the trade agreement in the EU, the partner country and developing countries. SIAs are undertaken independently by external consultants commissioned by the European Commission. SIA findings and recommendations feed into the negotiations, helping negotiators to optimise the related policy choices.

 

European Union-Australia Free Trade Agreement (FTA)

The European Union (EU) and the Australian Government launched negotiations on 18 June 2018 for a free trade agreement (FTA) to facilitate trade in industrial products between the EU and Australia by reducing technical barriers and improve trade in services and investments. Prior trade and economic relations have been conducted under the 2008 European Union-Australia Partnership Framework.

Based on 2018-19 data, as a bloc, the European Union was Australia’s second largest trading partner, third largest export destination, and second largest services export market. The EU was Australia’s largest source of foreign investment in 2018.

The Sustainability Impact Assessment (SIA) developed for the EU-AUS FTA negotiations concluded that the potential economic impacts show overall positive macro-economic effects for both the EU and Australia, based on incorporating an FTA between the EU and New Zealand. Bilateral exports are expected to increase by 32.5 percent and 10.4 percent respectively for the EU and Australia in the ambitious scenario, with sectoral variation with livestock meat exports benefiting most in Australia, and motor vehicles and machinery in the EU. SMEs in the EU and Australia as well as consumers in both countries were also expected to benefit. Environmental effects were expected to be marginally negative.

Australian industry and individual submissions on the potential opportunities and commercial, economic, regional and other impacts that could be expected to arise from an Australia-EU FTA can be found here.

The EU’s text proposal for the Trade and Sustainable Development Chapter can be found here.

The eleventh round of negotiations for an ambitious and comprehensive EU-Australia trade agreement was held virtually from 1 to 11 June 2021. Negotiators discussed and progressed in most areas of the future agreement, such as services and investment, trade in goods, technical barriers to trade, trade and sustainable development, intellectual property rights including geographical indications, sanitary and phytosanitary measures. The chapter on professional services was provisionally concluded. The report of the 11th round of negotiations can be found here. The next negotiation round is planned for autumn 2021.

Sectoral & Cross Sectoral Policies

Sectoral & Cross Sectoral Policies

Comparative EU and Australian policies with an industry sectoral or wider cross-sectoral application:

  • Circular Economy
  • Sustainable Finance
  • Renewable Energy
  • Energy Efficiency
  • Sustainable Buildings and Construction
  • Green Cooling and Refrigeration
  • Sustainable Agriculture and Food Systems
  • Sustainable Infrastructure and Smart Mobility

Circular Economy

A new EU Circular Economy Action Plan (CEAP) has been adopted as one of the main blocks of the European Green Deal in March 2020, with initiatives along the life cycle of products, targeting for example their design, promoting circular economy processes, fostering sustainable consumption, and aiming to ensure that the resources used are kept in the EU economy for as long as possible. Actions for the circular transition have application to waste management, renewable energy, energy efficiency, sustainable finance/investment, construction, heating/cooling and other industry sectors. CEAP is intertwined with the EU’s Industrial Strategy, which features plans to revamp and decarbonise high-carbon, energy-intensive sectors and develop a smart and sustainable transport network. It will support breakthrough clean technologies for zero-carbon steel.

The Plan’s focus is on sectors that use the most resources and where the potential for circularity is high such as: electronics and ICT; batteries and vehicles; packaging; plastics; textiles; construction and buildings; food; water and nutrients. It proposes measures to make sustainable products the norm in the EU; empower consumers and public buyers; ensure less waste (i.e., here and here) and further reduce industrial emissions; make circularity work for people, regions and cities, and for the EU to lead global efforts on circular economy. A ‘sustainable products’ policy is proposed for the circular design of all products to prioritise reducing and reusing materials before recycling.

Sustainable Finance

The European Green Deal Investment Plan, also referred to as the Sustainable Europe Investment Plan, released in January 2020 establishes sustainable investment as one of the main pillars of the EU Green Deal. Aiming to raise at least €1 trillion in sustainable investments over the next decade, it forms the key enabling element for a framework to facilitate the public and private investments needed for the transition of the entire European Union to a climate-neutral, green, competitive and inclusive economy.

The EU Taxonomy, which  was launched as part of the EU Action Plan for Financing Sustainable Growth that predates the EU Green Deal, provides an EU classification system for sustainable activities and aligns with the economic sectors targeted for policy reform under the EU Green Deal (agriculture, electricity, mobility, construction, waste and others). It entered into force on 12 July 2020. 

The sustainable banking and investment sector incorporates environmental and social responsibility into the operations and products of financial markets and the investment chain. Participants in this sector include banks, investment organisations, pension and superannuation funds.

In July 2021, the adopted a number of additional measures to increase its level of ambition on sustainable finance, including a new Sustainable Finance Strategy, a European Green Bond Standard, and a Delegated Act on the information to be disclosed by financial and non-financial companies about how sustainable their activities are, based on Article 8 of the EU Taxonomy.

Renewable Energy

Renewable energies play a strategic role in transforming the energy market and facilitating the decarbonisation of industry. The sector ranges from generation and storage of renewable energies to the recycling of renewable energy equipment and infrastructure investment. Industry sectors involved include energy efficiency, building and construction, heating and cooling, infrastructure and mobility. Hydrogen and battery production are identified as two out of nine strategic value chains (SVCs) for the EU Industrial Strategy.

Decarbonisation of the European energy system through ‘clean, affordable and secure energy’ for consumers and businesses proposed under the EU Green Deal by 2050 will require large scale deployment by 2030, and an energy market that is fully integrated, interconnected and digitalised. Policy proposals include funding to scale up green hydrogen research and innovation, expanding hydrogen production and renewable energy investments and infrastructure including for off-shore wind and ocean energy. Basis for this lies in the 2019 Clean Energy for All Europeans Package, which consists of 8 laws, including Energy Performance of Buildings DirectiveRenewable Energy DirectiveEnergy Efficiency Directive, governance regulation such as national energy and climate plans (NECPs), electricity market design and other non-legislative initiatives.

Energy Efficiency

Energy efficiency plays a crucial role in the energy transition of economies worldwide. Energy efficiency is a cross-sectoral issue where significant improvements can be made across transportation, agriculture, industrial manufacturing, residential or commercial building and construction and infrastructure sectors and along supply chains and the lifecycle of products (from extraction of materials, manufacturing and construction through to consumption, demolition and recycling).

Improvements in energy performance not only deliver strong cost-effective potential and aid in reducing carbon emissions but can also lead to improved energy productivity and offers potential to better manage energy demand and thus a competitive energy market. Energy efficiency is a crucial part of the Basis for this lies in the 2019 Clean Energy for All Europeans Package, which consists of 8 laws, including Energy Performance of Buildings DirectiveRenewable Energy DirectiveEnergy Efficiency Directive, governance regulation such as national energy and climate plans (NECPs), electricity market design and other non-legislative initiatives. See also green cooling and refrigeration. 

Sustainable Buildings & Construction

The construction, use and renovation of buildings in the EU accounts for 40% of energy consumed. With an annual renovation rate of only around 1%, the EU Green Deal proposes to increase renovation rates and address the challenges of energy efficiency and affordability through a ‘renovation’ wave of private and public buildings. Consideration will be given to including the energy performance of buildings in European emissions trading, and the review of construction products regulations to ensure the design of new and renovated buildings align with the needs of the circular economy.

An initiative is proposed in 2020 which brings together the buildings and construction sector, architects and engineers and local authorities to address the barriers to renovation and to consider innovative financing schemes.

Green Cooling and Refrigeration

The Green Cooling and Refrigeration sector aims at providing air-conditioning, heating and refrigeration solutions with minimum negative impacts on the environment. This includes chemicals and other components necessary to manufacture and run these solutions.

Energy efficiency improvements and the replacement of HFC gases through natural alternatives in the green cooling and refrigeration sector assist the decarbonisation of building stock as well as of the food industry and in the healthcare sector. Heating and cooling alone account for 32% of global final energy demand and 30% of energy-related CO2 emissions.

Furthermore, they will lead to significant emission reductions throughout the life cycle of all heating, cooling and ventilation equipment. This will not only lead to cost decreases for both producers and users of products; the increased use of natural refrigerants will also prevent further resource depletion of scarce gas resources, reduce persistent HFC waste in the atmosphere and help improve ambient and indoor air quality.

Sustainable Agriculture and Food Systems

The food and drink production chain encompasses elements such as food production (farming) and manufacturing, as well as food safety and science, packaging, recycling and food waste.  The EU ‘Farm to Fork Strategy’ seeks to accelerate the transition to a sustainable food system, with actions designed to create a resilient and robust food system.

Measures in the Strategy address food security and the responsibilities of all actors for each step in the food (value) chain (ie: production, packaging, declaration, storage, transport, food safety, food waste, food fraud and imported food), together with policies for:

  • Green business models including carbon sequestration
  • Circular bio-based economy
  • Reducing pesticides, fertilisers, antibiotics
  • Land and seas restoration to reduce biodiversity loss
  • Animal welfare and plant health, organic farming
  • Food loss and food waste.

Linking to circular economy objectives, the Strategy sets a target of 50% reduction in food waste by 2030.

Sustainable Infrastructure and Smart Mobility

Accounting for a quarter of all EU Greenhouse gas emissions, a reduction of 90% in transport emissions is required by 2050 to achieve climate neutrality. Decarbonising the transport sector by creating smart and sustainable mobility requires a strong focus on the uptake of clean vehicles and alternative fuels (for road, maritime and aviation), as well as increasing the share of more sustainable transport modes (rail, inland waterways) and improvement of the transport sector’s efficiency.

A strategy for sustainable mobility will be developed in 2020 by the European Commission to address all emissions sources and increase the efficiency of the transport system. This will include reductions aviation emissions, shifting to multi-modal freight operations involving road and water transport, smart traffic management enabled by digitalisation, and the production and deployment of sustainable alternative transport fuels and an increase of 1m recharging and re-fuelling points.