Europe's ambition to decarbonise its heavy industry has long been seen as a trade-off with economic growth and employment. A new study, however, suggests that the continent can dramatically cut industrial emissions without hollowing out its manufacturing base — but it will require pragmatic choices about what to produce at home and what to import.
Researchers from the Euro-Mediterranean Center on Climate Change (CMCC Foundation), Politecnico di Milano and Technische Universität Berlin modelled the future of steel, cement and chemical production through 2050. Their findings, published in the journal Nature Climate Change, offer a roadmap for a cleaner European industrial sector.
Green hydrogen and recycled steel
Under the most stringent emissions scenario — a 90 per cent cut in greenhouse gases by 2040 — the study finds that most steel, ammonia and methanol could be produced using green hydrogen, which is made with renewable electricity rather than fossil fuels. Steelmakers would also rely more on recycled scrap metal and electrified processes, reducing their dependence on coal and gas.
Cement, however, remains a tougher challenge. The chemical process of making cement releases CO2 regardless of the energy source. The study suggests that carbon capture at cement plants could limit atmospheric emissions, though the technology is still unproven at commercial scale.
The cost of going green
The transition will not be cheap. The study projects that the most expensive period will be around 2040, when European industry will need massive investments in new infrastructure and equipment. Costs are expected to fall by 2050, but Europe will still face a competitive disadvantage compared to regions with cheaper renewable energy.
One potential solution is to relocate factories to areas with abundant, low-cost renewables. The model shows that, if companies were free to move, production would shift to Spain, the Nordic countries and the UK, where wind and solar power are cheaper. However, the authors note that these savings do not account for the costs of relocating plants, building new infrastructure, or retraining workers.
Importing green materials as a cheaper alternative
The study identifies a more cost-effective path: importing some of the most energy-intensive intermediate materials, such as ammonia, methanol and hot-briquetted iron (HBI), from countries with cheaper renewable electricity. This would allow European factories to focus on higher-value manufacturing steps, keeping jobs and economic activity at home.
By 2050, under this scenario, almost all ammonia and methanol could be imported, and Europe would need to produce around 25 per cent less green hydrogen. HBI, a form of iron used in steelmaking, could be shipped to European plants for the final stages of production.
Risks of import dependence
But relying on imports brings its own vulnerabilities. The study does not account for geopolitical shocks, such as wars or pandemics, that could disrupt supply chains. Europe has already experienced how fragile these can be: the conflict in the Middle East has threatened shipments through the Strait of Hormuz, and Russia's gas cuts after its invasion of Ukraine forced many European factories to reduce output.
The researchers counter that green iron, ammonia and methanol can be sourced from any region with cheap renewables, unlike fossil fuels which depend on a handful of suppliers and fixed pipelines. They also point out that a fossil fuel supply chain is inherently polluting, whereas a green iron or ammonia supply chain can be progressively decarbonised — a goal that the EU's Carbon Border Adjustment Mechanism (CBAM) is designed to encourage.
Moreover, they argue, the alternative of producing everything at home is not true independence. The study estimates that keeping all production in Europe would require subsidies exceeding €200 billion a year. As co-author Massimo Tavoni, director of the CMCC Foundation, puts it: "Europe should be practical about its capacity to expand its heavy industry."
The study offers a nuanced message: Europe can decarbonise without sacrificing its industrial base, but it must be willing to embrace a global division of labour, importing the most energy-intensive materials while focusing on high-value manufacturing. That approach, the authors argue, is both economically sensible and environmentally necessary.
