Decarbonisation of the automotive and steel industry I adelphi

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Anastasia Steinlein

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The EU and China are major trading partners for each other, with supply chains that are closely intertwined. This applies especially to the high-demand steel and automotive industries in both regions. These sectors generate huge amounts of CO2 emissions, which poses major challenges for both economic powers in decarbonising their industries. As the adelphi authors point out in this study, there is huge potential for cooperation in this area.

Driving decarbonisation together

However, the production of steel and cars produces considerable amounts of CO2 emissions – especially in the global supply chains. This includes the extraction and processing of raw materials, the manufacture of components and transport. In order to achieve their climate goals, the EU and China must push forward the decarbonisation of their industries – and their supply chains. The best political means for this is cooperation.

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red door with chinese dragon looking door handles

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Enormous potential for synergies

The study “The potential for EU-Chinese cooperation in the decarbonisation of the steel and automotive industries” addresses exactly that: It aims to strengthen cooperation through a better mutual understanding of the respective decarbonisation strategies of the steel and automotive sectors, including supply chains. China and the EU not only share common (industrial) policy strategies and challenges, but also many opportunities for cooperation and the scaling of bilateral and international solutions.

The responsible and sustainable transformation of supply chains requires joint EU-China efforts based on mutual understanding and a willingness to work together. China is an integral part of Europe’s supply chains – and vice versa.

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The steel industry

Both China and the EU have set ambitious goals for the low-carbon transformation of the steel sector. For example, they rely a lot on the development of new production methods. In the future, steel is to be produced primarily on the basis of hydrogen. However, the current technologies for decarbonisation are not yet fully developed. Significant investments in research and innovation are required for the advancement and further diffusion of low-carbon technologies. These are the challenges in the steel sector that the EU and China share.

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27%

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share of the Chinese steel and automotive industry

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in the total CO2 emissions

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The automotive industry

When it comes to the automotive industry, the efforts of both economic regions are geared towards e-mobility. Here, the CO2 emissions of the supply chain come even more to the fore in the decarbonisation strategies. The life cycle of a vehicle is long – just like its supply chain. Politics and industry are currently trying to find out how to properly calculate the many emissions and develop uniform standards. Another issue is the lack of sufficient green energy and recyclable materials. In addition, both China and the EU have recognised that the circular economy – particularly in the case of electric vehicle batteries – is an important piece of the puzzle to reduce the environmental impact in the automotive supply chain.

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18.5%

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share of EU steel and automotive industry

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in total CO2 emissions

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an infographic regarding the darbonization of the automotive and steel industries in the EU and China

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Fields of action for politics and business

This results in the following fields of action for politics and business, which offer considerable potential for reducing greenhouse gas emissions through improved dialogue and cooperation between Europe and China.

5 potential areas of cooperation in politics

Provide sufficient funding for the development of pilot and demonstration projects for existing decarbonisation technologies
Facilitate dialogue between EU and China policymakers on the Carbon Border Adjustment Mechanism (CBAM) and a “Climate Club”.
Develop a common price signal for CO2 emission reductions
Enable a level playing field for joint ventures and shared industrial activities
Take action to develop common standards for the decarbonisation process

5 potential areas of cooperation in industry

Set clear supply chain decarbonisation targets
Increase cross-sectoral cooperation
Increase investments in joint research and the development of pilot projects
Improve the exchange of knowledge about decarbonisation with supplier companies
Jointly increase transparency about greenhouse gas emissions along the supply chain

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