Opinion of the European Economic and Social Committee on the decarbonisation of European industry and the role of innovation and digitalisation in driving it (Exploratory opinion requested by the Spanish Presidency)
Date: 2023-07-12
Institutions: European Economic and Social Committee
Subjects: EU energy policy, EU industrial policy, clean technology, digital transformation, digitisation, innovation, professional qualifications, reduction of gas emissions, social dialogue, vocational retraining








C_2023349EN.01003601.xml










29.9.2023   


EN


Official Journal of the European Union


C 349/36







Opinion of the European Economic and Social Committee on the decarbonisation of European industry and the role of innovation and digitalisation in driving it
(Exploratory opinion requested by the Spanish Presidency)
(2023/C 349/07)







Rapporteur:



Andrés BARCELÓ DELGADO





Co-rapporteur:



Monika SITÁROVÁ











Referral by the Spanish Presidency of the Council


Letter of 8 December 2022




Legal basis


Article 304 of the Treaty on the Functioning of the European Union
Exploratory opinion




Bureau decision


13.12.2022




Section responsible


Consultative Commission on Industrial Change




Adopted in section


22.6.2023




Adopted at plenary


12.7.2023




Plenary session No


580




Outcome of vote
(for/against/abstentions)


185/3/7




1.   Conclusions and recommendations









1.1.


The EESC believes strongly that the decarbonisation of EU industry must be coupled with enhanced digitalisation.












1.2.


Innovation is imperative if industry is to be fully decarbonised, as many technologies are still being developed.












1.3.


The EU cannot achieve decarbonisation without a strong workers’ involvement and social dialogue, and reskilling and upskilling programmes must be a top priority with a view to meeting the targets. Social dialogue and involvement of workers’ representatives must play a role in the reskilling and upskilling programmes that will be a prerequisite for the success of new technologies and working methods.












1.4.


The EU needs to both identify the technologies requiring specific support to develop manufacturing activities and propose additional measures.












1.5.


Carbon capture, utilisation and storage techniques must be developed to reduce ‘hard to abate’ emissions in industries such as cement and refineries; the carbon itself can be used as a raw material for efuels.












1.6.


America’s Inflation Reduction Act (IRA) is a serious challenge for the EU and its industry. The Commission proposal on Net Zero Industry could be an effective answer to the threat of massive relocation of industrial activities from the EU to third countries. The EU proposals must not overlook the social conditionality of IRA.












1.7.


Industrial companies need public support during the decarbonisation process (e.g. increasing the de minimis threshold, reviewing tax policies), but they must also abide by single market principles.












1.8.


The EESC notes that current examples of digital twins in industry, as pointed out by the CCMI/206 opinion, are encouraging in terms of improving industrial performance.












1.9.


The EESC urges the European authorities and Member States to accelerate permitting processes for renewable energy and industrial activities. Both the current lengthy procedure involved in obtaining permits and excessive red tape discourage new investments.












1.10.


The EESC welcomes the Hydrogen Bank initiative and hopes that it will help deploy hydrogen technology, particularly in hard-to-abate industries.












1.11.


Current infrastructure must be properly maintained in order to develop new industrial processes. Specific infrastructure programmes must be developed to accompany industrial decarbonisation.




2.   General comments









2.1.


The future Spanish presidency of the EU Council has asked the EESC to draw up an exploratory opinion on the decarbonisation of European industry and the role of digitalisation and innovation in this process.












2.2.


The EESC has previously issued an own-initiative opinion on decarbonisation technologies with a focus on ETS industries (1).












2.3.


European society has taken the necessary and radical decision to achieve full decarbonisation by 2050. Industry will be affected hardest by this, and some industrial activities will find it very difficult to adapt.












2.4.


Some industries have made heavy investments in recent years and will be forced to make yet more radical changes to reach the net zero target. European society must therefore support them as they move from fossil fuels to climate-neutral production.












2.5.


Some ‘hard to abate’ industrial activities must adopt carbon capture and storage technologies (CCS). In the future, CO2 emissions could be utilised to produce high added value goods.












2.6.


The extent of the EU’s dependence on third countries for the supply of some clean technologies makes it extremely challenging for the EU to reach its target of 40 % renewable energy by 2030. Europe is largely reliant on imports when it comes to cleantech; at the same time, the EU’s deployment of cleantech will have to be dramatically accelerated to reach the Fit for 55 objectives. The EU needs to identify the technologies requiring specific support to develop manufacturing activities and propose additional measures.












2.7.


European industry is under constant pressure from international competition, requiring a quick response and continuous development and adaptation of business so that it continues to be profitable to produce in the EU. This is already an important factor in modern production, but with new digital technologies, manufacturing companies can deliver major improvements in efficiency and tap completely new opportunities for developing products, services and business models.












2.8.


The digital transition envisaged by the EU Green Deal is a prerequisite for meeting the decarbonisation target.












2.9.


Nothing can be achieved without people. The European workforce is highly skilled in terms of current technology, but it must be retrained to seize the opportunity of the new technologies that will be developed and rolled out in the near future.












2.10.


Under the generally accepted principle of leaving no one behind, special attention must be paid to the local communities where industrial facilities are established, given the changes that will occur in the coming years and the impact that those changes will have, in the short term, on employment in the areas concerned.




3.   New landscape in the EU and elsewhere









3.1.


Meanwhile, the European Union must face the new challenges posed by the implementation of America’s new IRA (2), which may provide an incentive for the relocation of a large part of the European industrial value chain to the USA, particularly those related to renewable and low-carbon technologies. The IRA consists of a mixture of grants, tax incentives and loan guarantees, accompanied by various social and economic conditions. Corporate tax credits comprise the bulk of the legislation, amounting to approximately USD 216 billion.












3.2.


Tax credits for production are also available for wind and solar projects. Companies which want access to those production credits must comply with domestic content requirements: iron, steel and manufactured products of power-generating facilities must be produced domestically. All iron and steel manufacturing processes must take place in the United States, and manufactured products are considered domestically produced if a threshold percentage of the total manufacturing costs of products come from US-based mining, production or manufacturing processes. This threshold stands at 40 % and will increase to 55 % in 2026.












3.3.


The Commission has proposed new legislation to cope with the challenge of American and Chinese competition to the European Union. The EESC is drafting an opinion on this topic.












3.4.


The EESC recognises that the proposal is moving in the right direction; however, it is barely adequate to meet the ambitious target and improvements to the legislative process are needed.












3.5.


The gap between gas prices in Europe and in the USA is enormous, even with the recent drop in European prices. Some like-minded suppliers are using the ‘cost of opportunity’ approach in relation to natural gas supply and prices, and the EU, once almost free of its dependence on Russian gas, is now entangled in an even more expensive framework of gas and electricity prices. This is undermining both EU industry’s competitiveness and the deployment of electrification.












3.6.


The decarbonisation process will increase the demand for electricity; the EESC calls for climate-neutral technology that gives priority to an affordable carbon-free power supply and energy security.












3.7.


European companies must buy carbon certificates under the ETS framework. Carbon certificate prices are over EUR 80, and the price premium on electricity spot prices due to the increasing costs of carbon certificates is around EUR 40. With a few exceptions, the EU’s other main trade partners do not have this kind of carbon price, and so it will be difficult in the future for EU industry to compete in the international markets, even with the CBAM shield for the single market.












3.8.


The supply of affordable decarbonised energy is key to developing new industrial activities in Europe. The impact of the Net-Zero Industry Act (NZIA) on energy prices will be limited in the short term, and its long-term impact remains uncertain. The ambition of making Europe less dependent on imported energy and less exposed to global market volatility will not materialise overnight. Still, industry needs immediate solutions to cope with energy prices that are still higher in Europe than in many other parts of the world. The EU’s Green Deal Industrial Plan will only be successful if the EU also reforms its energy policy, notably with a revised Electricity Market Design Directive that loses no time in securing a supply of affordable, low-carbon electricity corresponding to the increasing need for electrification.












3.9.


The EU seems to be trapped between two approaches: it is striving to converge with the USA and keep a strong industrial footprint in Europe, while also complying with WTO rules which sometimes clash completely with the American approach.












3.10.


Keeping the EU single market alive is another challenge facing the EU. As the Commission has pointed out, flexibility as regards State aid has been concentrated in two Member States that account for more than 70 % of the total clearance provided by the Commission under the transitional exception (in the context of COVID-19 and Russia’s war against Ukraine).












3.11.


The European institutions and Member States must avoid providing companies with excessive State aid in order to safeguard the single market, the cornerstone of the European Union. However, in order to enable SMEs to become digitalised and promote innovation, the de minimis threshold could be increased as it hardly hampers competition. The experience of the Digital Innovation Hub (3) must be spread across the EU.




4.   The role of innovation









4.1.


Innovation is key to enabling the EU to meet the net zero targets, and more commercially available technologies must be placed on the market. The role of innovation in companies is the key tool for deploying new and green technologies that are both technically and economically viable.












4.2.


On the other hand, the need to encourage a fair market for ‘real and reliable green goods’, using public procurement as the main driver, must contribute to expanding the use of new green technologies.












4.3.


Europe lacks raw materials, but the proposed regulation on Critical Raw Materials will promote domestically produced recycled raw materials for industry. The main competitive advantage of EU industry is its technological capability and highly skilled workforce, which allows it to be the leader in global markets.












4.4.


This competitive advantage is now challenged by third countries, as the only tool for maintaining leadership is to shield innovation, striking the right balance between protecting the environment, people and innovation and speeding up regulatory authorisations, not only in ‘special areas’ as in the Commission proposal, but elsewhere as well. There are flagrant examples of unjustifiable delays in providing the clearance to develop new industrial facilities.












4.5.


SMEs are the backbone of European manufacturing and in order to drive on decarbonisation, special attention must be given to them, with specific programmes to promote effective innovation and digitalisation.












4.6.


As decarbonisation will require huge investments, the EESC suggests that the EU institutions use both Just Transition and NextGeneration EU funds to provide appropriate support for the decarbonisation process.












4.7.


Current infrastructure is inadequate for the necessary changes in industry and society, and the EESC strongly urges the public authorities to launch a programme to maintain and improve the infrastructure needed to deploy the new technologies smoothly.












4.8.


Hydrogen seems to be the best choice to decarbonise ‘hard to abate’ industries that are not eligible for full electrification. The EU’s recent Hydrogen Bank initiative would help properly deploy this technology, in terms of quantity and price. Some regional experiences of innovation with hydrogen are very useful, as they bring together big companies, research centres, universities and SMEs.




5.   The role of digitalisation









5.1.


Digitalisation and innovation contribute significantly to the decarbonisation of European industry. In fact, industry, where digital technology and the physical production of goods converge, can be considered a key player in digital transformation and industrial decarbonisation, as it favours the modernisation of industrial processes, products and business models, with a positive effect on productivity.












5.2.


Technologies such as sensors, machine-to-machine communication, data analysis and robotics create opportunities for manufacturing companies. Through production optimisation and automation, new technologies can make it possible for European companies to compete with countries with traditionally lower production costs.












5.3.


Many sectors have already been heavily automated and are further impacted by digital technologies, for instance smart robotics for assembly, process control computers in the chemicals sector, and 3D printing for producing components and spare parts. The second wave of digital transformation driven by Artificial Intelligence, the Industrial internet of Things and Big Data is likely to be more disruptive and may cause inequalities between companies and between EU regions.












5.4.


With the help of sensor technology, production can be monitored and optimised, for example by continuously monitoring the utilisation of production equipment, energy input, the need for raw materials and spare parts, product quality and emissions. Analysis of collected data can give the company insight into which processes work optimally and which can be improved, as well as the climate footprint.












5.5.


Digitalisation has great potential for reducing industry’s climate impact, but digitalisation and the handling of data must factor in the climate perspective.




6.   Reskilling and upskilling









6.1.


The green and digital transitions must be seen as an opportunity to create and promote high-quality jobs, while attracting diversity to the industry, and in particular seeking female talent, promoting openness to skilled workers from third countries and making an intensive effort to make the industry attractive to young people..












6.2.


The European Commission has presented a wide catalogue of initiatives developed under the European Skills Agenda, including the European Pact for Skills and the European Year of Skills 2023. Skills partnerships will be created or extended. Net-Zero Industry Academies will be established to support upskilling and reskilling programmes in strategic industries for the green transition. State aid and IPCEIs should also provide additional financial resources to support skills objectives, and the EU budget and NextGenerationEU are already providing EUR 64,8 bn to support the EU Skills Agenda. Some current projects, under the Erasmus+ umbrella, such as ESSA (4), are very promising.












6.3.


Social dialogue is key in order to properly deploy the new technologies and ease social and workers’ acceptance of the future changes in working processes.












6.4.


However, in order to take full advantage of digital technologies in production, it is important not to focus only on technology, but rather to think of the business and organisation as a whole. A digital strategy and action plans are needed to make digitalisation manageable.












6.5.


The challenge is to ensure that the digital transformation leads to more social progress and leaves no one behind. Workers must be able to anticipate the consequences of new technological developments and to influence employers’ decisions by means of an improved right to participation. The consequences of digital technologies must be discussed and lead to negotiated solutions at all levels: company, sector, national and European.












6.6.


The EU workforce must be properly reskilled and upskilled in order to have the new skills needed to master new job requirements. Current skills must be assessed, in the framework of social dialogue, as regards whether or not they are valuable for future developments.












6.7.


Keeping up a lively and effective social dialogue will definitely contribute to better deployment and acceptance of new technologies, minimising the social costs.






Brussels, 12 July 2023.


The President of the European Economic and Social Committee

Oliver RÖPKE
            





(1)  Opinion of the European Economic and Social Committee on the Role of carbon removal technologies in decarbonising European industry (own-initiative opinion) (OJ C 486, 21.12.2022, p. 53).

(2)  Inflation Reduction Act of 2022.

(3)  https://european-digital-innovation-hubs.ec.europa.eu/.

(4)  https://www.estep.eu/essa/.