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Industrial decarbonisation while maintaining competitiveness: Slovakia’s challenges on the road to net-zero

As the European Union gets ready to publish its Fit for 55 legislative package later this summer, to put the EU on track to reach an emissions reduction of at least 55 per cent by 2030, Slovakia has its own challenges to overcome, especially regarding industrial decarbonisation while, at the same time, maintaining its competitiveness.

According to an analysis published in 2019 by Poštová Banka, Slovakia is one of the most industrialised countries in the EU, with almost one-third of its citizens working in the industrial sector, a figure that is second only to the Czech Republic (36.5 per cent). If, on one hand, being of the most industrialised countries can be considered as an advantage, to reach the 2030 emissions reduction target, decarbonising Slovakia’s heavy industry will represent quite the challenge.

“The CO2 intensity per GDP is quite high in Slovakia, it is the 6th country in the EU and although the figures improved over the past decade, our efforts should move towards the industrial sector,” said Gabriela Fisherova, Director General at the Directorate of Climate Change and Air Protection at the Ministry of the Environment, during a webinar entitled A European Green Deal Balancing Act: The Present and Future Competitiveness of Industrial Decarbonisation organised by Globsec.

“More than 41 per cent of total emissions in Slovakia comes from industry, including energy,” she explained. “We are interested to see how the ETS scheme will look like [in the Fit for 55 package], how the carbon border adjustment mechanism will work and overall how things will be included in the whole picture.”

According to her and the Ministry’s previous and current scenario, there is no way we can reach this target with business as usual, without a really significant technological breakthrough.

“We are going to present two schemes from the Modernisation Fund: one about producing electricity from renewable energy sources and the other one for district heating and energy efficiency,” Mrs Fisherova revealed. “It is a big step. There are a lot of limitations when it comes to state aid rules regarding competitiveness and transparency, so it is not easy but I believe we would be able to present the first scheme in July this year.”

How to decarbonise the steel industry

A scheme that has been welcome by the private sector as well, although something similar for the industry is also long-awaited. In particular, the steel industry, which employs 3.2 per cent of Slovakia’s population.

“Steel is central to the EU economy and underpins the development of major manufacturing sectors along the value chain,” commented Miroslav Kiral’varga, Vice President of External Affairs, Administration and Business Development at US Steel Kosice, the biggest private-sector employer in the country.

Indeed, the steel sector produces on average 170 million tonnes of steel per year at more than 500 steel production sites across 23 EU member states.

“We are aware that industry is crucial especially steel, chemicals and we cannot lose them as, for example, also solar panels and wind turbines are made of that, so we need to keep the competence to produce these products,” underlined Tomas Kakula, Director General for Competitiveness at the Ministry of Economy.

US Steel Kosice.

Furthermore, steel is 100 per cent recyclable and a fundamental part of the circular economy. As a basic engineering material, steel is also an essential factor in the development and deployment of innovative, CO2-mitigating technologies, improving resource efficiency and fostering sustainable development in Europe.

“To make the EU recovery plan and the green transition successful also a green deal on steel should be agreed between the EU, the steel industry and governments with a clear action plan by 2030,” Mr Kiral’varga said speaking at the Globsec webinar.

He mentioned the approach of Germany as a successful example to follow as the country is ready to spend over 6 billion US dollars to reach a clean steel production.

“The Modernisation Fund is one the most important funds and it needs to be used in a transparent way, properly and for the benefit of the country and the next generations,” he added. “The same approach should be taken with the EU Recovery Plan, especially because this is something that it will be paid back by the next generation so we need to be smart and, if possible, investing in something with return of investment.”

Slovakia’s recovery and resilience plan

At the end of April, the European Commission received an official recovery and resilience plan from Slovakia which has requested a total of 6.6 billion euro in grants. The Slovak plan is structured around five key policy priorities: green economy, education, R&D and innovation, health, and public administration/digitalisation. It includes measures supporting green investments, particularly in renewables, transport and buildings, healthcare, schooling and the digitalisation of public administration.

Now, the Commission will assess the Slovak plan within the next two months, including an assessment of whether the plans dedicate at least 37 per cent of expenditure to investments and reforms that support climate objectives and 20 per cent to the digital transition.  

For Tomas Kakula, the green transition will come at some cost but competitiveness should remain.

“Europe must stay competitive,” he said. “But we cannot be just ourselves in this fight. In the globalised world we live in, the last thing we want is to have a clean EU in a dirty world.”

However, Mr Kakula is quite positive as he already sees a shift from the industry side, from a we-cannot-do-it approach to a “yes, we can but we need some help”. And a positive attitude is what is needed for the next decade, the most crucial one on the road towards decarbonisation.

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