Mobilizing Consumer Demand for Sustainable Investments in European Heavy Industry

Overview

European heavy industry—including steel, chemicals, refining, and fertilizers—is vital for the continent’s economic prosperity and strategic autonomy. These sectors supply critical materials for construction, manufacturing, food, and medicines, supporting millions of high-quality jobs across the European Union (EU). However, they are also significant contributors to greenhouse gas (GHG) emissions, creating tension between economic importance and environmental sustainability.

Challenges Facing European Heavy Industry

The sector faces multiple pressures:

• High Energy and Feedstock Costs: Rising input costs strain profitability.
• CO2 Emissions Costs: Increasing expenses related to carbon emissions under the EU Emissions Trading System (ETS).
• Competitive Pressure: Imports from countries with lower environmental standards undercut EU producers.
• Risk of Deindustrialization: These factors have already caused plant closures and offshoring of production, threatening industrial capacity within the EU.

Moreover, carbon emissions reductions achieved by local producers are being offset by “carbon offshoring” — increased emissions associated with imported goods. As the EU phases out free allowances under the ETS and implements the Carbon Border Adjustment Mechanism (CBAM), costs and competitive pressures will intensify. Yet CBAM faces risks of circumvention, limiting its effectiveness.

Need for Demand-Side Policies

The report, developed by Deloitte in partnership with industry associations, highlights that supporting sustainable investments in heavy industry requires creating additional demand:

• Economic Viability: Transitioning from conventional to sustainable production remains expensive, with a large cost gap unlikely to close through innovation or subsidies alone.
• Financing Difficulty: Industry profits and public subsidies cannot fully cover the investments needed to green production processes.
• Consumer Price Impact: Passing the incremental costs to end consumers would only modestly increase retail prices—typically less than 1%—since heavy industry materials account for a small portion of final product prices.
• Potential Benefits: This slight price increase could enable substantial emissions reductions without significantly affecting affordability or consumer behavior.

Conceptual Architecture of Demand Mandates

While the detailed mechanisms were not fully disclosed in the briefing, the report suggests exploring demand mandates as a strategic policy approach. This involves setting requirements that encourage or obligate consumers—whether businesses or end-users—to prioritize sustainable products, thereby stimulating market demand for low-carbon materials and products.

Such policies could:

• Reduce import dependency by strengthening local, sustainable production.
• Help level the playing field against lower-cost, higher-emission imported goods.
• Encourage investment in cleaner technologies by assuring market demand.

Conclusion

European heavy industry is at a crossroads, balancing economic necessity against climate imperatives. This Deloitte-led study underscores the critical role of demand-side policies to mobilize consumer demand for sustainable investments. By enabling a modest increase in product prices, these measures could catalyze the transition toward greener heavy industry, support industrial resilience, and ensure European leadership in sustainability.

For full details, access the Deloitte report: Mobilizing consumer demand for sustainable investments (PDF)

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