On Wednesday 11 September 2024, Fedil organised the second Fedil Industry Day at L’Atelier. Two panels were held: one on decarbonisation, the other on supply chains. A dozen panellists spent almost three hours quoting Mario Draghi's , released on 9 September.
Fedil president got the ball rolling by quoting Draghi himself. “The current situation is really worrying. Growth has been slowing in Europe for a long time, but we ignored it... Now we can no longer ignore it.”
The global consulting sustainability and climate leader at Deloitte Deutschland, Bernhard Lorentz, explained: “When it comes to the climate transition, the main drivers have always been investors, then regulators. The focus of investors has shifted from old business to new business.”
Valley of death
By way of comparison, Americans had to cross the desert to get to the West during the gold rush. The European Union will have to cross the valley of death before it can achieve decarbonisation and net zero. For Lorentz, there are three types of industry: those for whom decarbonisation is a question of survival; those for whom it is an opportunity to grow; and those who are there to accompany the transition.
This transition involves five points:
—an increase in renewable energies
—an increase in energy efficiency
—electrification of everything that can be electrified;
—if this is not possible, then the use of green hydrogen; and
—carbon capture and storage.
And to achieve this, we need to invest massively in new green industries, whatever it takes.
How to decarbonise
Patrick Klein, managing director of Dyckerhoff, said: “To produce tonnes of green cement in 2029, we will need to use two to three times as much electricity as we do today, which would mean higher costs. It is important that energy costs in Europe stabilise.”
ArcelorMittal’s head of climate change, Stéphane Tondo, called for “more freedom for manufacturers in how they make the transition. Because other products from around the world could come onto the European market at much lower costs. We need to put in place premium conditions for buyers of green steel.”
Former energy minister Claude Turmes (déi Gréng) points out that the European countries that have seen an increase in manufacturing output are Denmark, Sweden, Spain and Portugal: “Four countries that were among the first to embark on the transition.”
The CEO of Creos, , recognised that in order to produce in a decarbonised way, electricity requirements will increase. “Investment is necessary, because production in Luxembourg is decentralised. Electricity needs to be available in sufficient quantities. This will result in an increase in prices, which will gradually stabilise.”
From the scarcity of certain metals to the vagaries of chocolate production
Arnaud Lanoe, investment analyst at Capitalatwork, began the panel with a focus on the rare metals necessary for the construction of car batteries and other electrical components. Whether we’re talking about nickel, cobalt or even lithium, the evidence is clear: everything passes through China. The country is either a direct producer of these rare metals or a processor of these resources. Inner Mongolia produces almost half of all rare metals. Geopolitical tensions are all it takes for supplies to take a hit.
The European Commission’s investment director, Merete Clausen, added: “The commission has launched a study of more than 5,000 raw resources and their supply chain. Thirty-four are in a very critical state. This mainly concerns rare metals and medical products.”
Is there a response to these supply problems?
Lanoe suggested several avenues: recycling rare metals (most of which are not recycled, or only with great difficulty); finding substitutes for these rare resources (but this would increase costs and reduce performance) and creating deep-sea mining operations where rare metal aggregates are found (a solution that requires the expertise of an environmentalist).
For Ferrero’s chief procurement and hazelnut company officer, Isabel Hochgesand, “it’s impossible to relocate cocoa or palm oil production to Europe, because the climate is not favourable. And raw resources are dependent on the weather, disease and pollution. Hence the need to implement a long-term strategy to mitigate the risks.”
Schiltz & Schiltz partner wants to “get rid of the red tape.” Like several players in the sector, he lamented the proliferation of regulations, “not all of which are necessary.”
The CEO of IEE, Paul Schockmel, regrets the lack of global standards in Europe in terms of regulations, which generates unnecessary costs. He explained: “It’s difficult to get banks or shareholders on board, as they need quick financial returns and don’t want to wait many years for a potential return on investment.”
Energy minister (DP) and Clausen from the European Commission agreed that the solution cannot come from Luxembourg, but must come from Europe. Regulatory means will be put in place to strengthen the funds.
To sum up the general thinking, we need to act quickly and the authorities need to make things easier. Demand for certain raw materials and for clean electricity will accelerate. The costs are enormous, but they will be even greater if the industry does not change. Delles said he heard the sector’s concerns before concluding that “the valley of death will have an end.”
This article was originally published in .