A Green COVID-19 Recovery of the EU Basic Materials Sector: Identifying Potentials, Barriers and Policy Solutions

38 Pages Posted: 16 Dec 2020

See all articles by Olga Chiappinelli

Olga Chiappinelli

German Institute for Economic Research (DIW Berlin)

Timo Gerres

Comillas Pontifical University

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin)

Frederik Lettow

affiliation not provided to SSRN

Heleen de Coninck

Radhoud University

Balázs Felsmann

affiliation not provided to SSRN

Eugénie Joltreau

Université Paris Dauphine

Gauri Khandekar

affiliation not provided to SSRN

Pedro Linares

Universidad Pontificia Comillas

Joern Constantin Richstein

German Institute for Economic Research (DIW Berlin)

Alexander Sniegocki

Warszawski Instytut Studiów Ekonomicznych (WISE)

Jan Stede

German Institute for Economic Research (DIW Berlin)

Tomas Wyns

affiliation not provided to SSRN

Cornelis Zandt

affiliation not provided to SSRN

Lars Zetterberg

IVL Swedish Environmental Research Institute

Date Written: December 2020

Abstract

This paper explores which climate-friendly projects could be part of the COVID-19 recovery while jump-starting the transition of the European basic materials industry. Findings from a literature review on technology options in advanced development stages for climate-friendly production and enhanced sorting and recycling of steel, cement, aluminium and plastics are combined with insights from interviews with 31 European industry stakeholders about the practical and economic feasibility of these technology options. Results indicate that with an estimated investment of 28.9 billion Euro, about 20% of EU’s basic materials could be produced through low-emission processes or additional recycling by 2025 with technologies that are commercially available or at pilot scale today. However, our stakeholder consultation also shows that in order to make these short-term investments viable in the long term, six main barriers need to be addressed, namely i) the lack of effective and predictable carbon pricing, ii) the limited availability of affordable green electricity, iii) the lack of a regulatory framework for circularity, iv) low technology readiness and funding, v) the lack of infrastructure for hydrogen, CO2 and power, and vi) the lack of demand for climate-friendly and recycled materials. Based on these insights, the paper proposes elements of a policy package that can create a long-term framework favourable for investments in these technologies and should ideally accompany the recovery package to give credibility to investors that the business case will last beyond the recovery timeframe.

Keywords: Green COVID-19 recovery, industrial decarbonisation, policy package, EU green deal, technology readiness

JEL Classification: L61,L65,Q54,Q55,Q58

Suggested Citation

Chiappinelli, Olga and Gerres, Timo and Neuhoff, Karsten and Lettow, Frederik and de Coninck, Heleen and Felsmann, Balázs and Joltreau, Eugénie and Khandekar, Gauri and Linares, Pedro and Richstein, Joern Constantin and Sniegocki, Alexander and Stede, Jan and Wyns, Tomas and Zandt, Cornelis and Zetterberg, Lars, A Green COVID-19 Recovery of the EU Basic Materials Sector: Identifying Potentials, Barriers and Policy Solutions (December 2020). DIW Berlin Discussion Paper No. 1921, Available at SSRN: https://ssrn.com/abstract=3749104 or http://dx.doi.org/10.2139/ssrn.3749104

Olga Chiappinelli (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Timo Gerres

Comillas Pontifical University ( email )

Alberto Aguilera 21
Madrid, Madrid 28015
Spain

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Frederik Lettow

affiliation not provided to SSRN

Heleen De Coninck

Radhoud University ( email )

Nijmegen, 6500 GL
Netherlands

Balázs Felsmann

affiliation not provided to SSRN

Eugénie Joltreau

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

Gauri Khandekar

affiliation not provided to SSRN

Pedro Linares

Universidad Pontificia Comillas ( email )

Alberto Aguilera 21
Madrid, Madrid 28015
Spain

Joern Constantin Richstein

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Alexander Sniegocki

Warszawski Instytut Studiów Ekonomicznych (WISE) ( email )

Al. Jerozolimskie 99 lok. 18
Warszawa, 02-001
Poland

Jan Stede

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Tomas Wyns

affiliation not provided to SSRN

Cornelis Zandt

affiliation not provided to SSRN

Lars Zetterberg

IVL Swedish Environmental Research Institute ( email )

Valhallavägen 81
Stockholm, 114 27
Sweden

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