Romania’s industrial production is essential for the national economy, but faces multiple challenges.
At one-fifth of Gross Value Added and workforce employment, Romania’s industry is a significant economic contributor. Heavy industry (steel, cement, chemicals and others) will face rising emissions costs and major competitiveness issues in the EU’s transition. At the same time, decarbonising heavy industry comes with significant capital and operational costs, as well as competition for high-value resources such as hydrogen. The costs and benefits of overcoming the transition challenge are significant.
This study presents a high-level cost assessment of decarbonisation pathways for Romania’s primary steel, cement, and chemical sectors.
In the cement sector:
- Deep decarbonisation will be unachievable without carbon capture and storage, which will require state support until green clinker becomes competitive
- However, without decarbonisation clinker will cost 10 times more in 2050 than today due to emissions costs, significantly outweighing any green clinker cost premium o At an estimated €900 million per average facility total payout under a simulated Carbon Contracts for Difference (CCfD) scheme running 2030-2044, cement will need other support instruments, such as Green Public Procurement, to bear the cost of its decarbonisation
In primary steel production:
- The capital investments and increased OPEX costs of green steel could drive an increase in liquid steel costs of 25% by 2030, with green steel only becoming competitive with conventional steel towards 2050.
- But transitioning to green steel would save nearly €1.7 billion/year in emissions costs by 2050, and could yield revenues from surplus emissions allowances o The cost and availability of green hydrogen will be a major driver for successful decarbonisation of primary steel o The state support required until green steel becomes competitive could take the form of OPEX support under a CCfD scheme.
In the chemicals sector:
- Electrifying industrial heat in the basic chemicals sector could bring significant energy cost savings and abate at least 17-25% of emissions
- The production of fertilisers will need to transition to green ammonia and apply additional decarbonisation measures to remain competitive, with public support likely required to cover a green ammonia premium and maintain competitiveness in the face of potentially cheap imports
- Affordable renewable hydrogen will be essential for Romania to minimise import dependence of fertilisers and even potentially become a green methanol producer.
- Without support for decarbonisation investments, there is a real risk of delocalising domestic production and increasing import dependence
If no immediate action is taken, there is a risk of breaking up domestic supply chains and delocalising emissions-intensive production abroad (liquid steel, clinker, and ammonia production)
- However, importing green industrial products offers relatively limited cost advantages, at the expense of jobs, economic growth, and strategic autonomy for Romania
- An equitable combination of state support and private investment will be required to offset the cost advantages of relocating production and importing green products, and a mix of funding, fiscal, and market creation mechanisms will be required
To maintain competitiveness, safeguard jobs, and become a green industrial production hub, Romania must take key actions:
- Trial a Green Public Procurement system for key infrastructure projects (including the use of steel and concrete), and evaluate the potential to expand to products such as vehicles and ships
- Chart a new course for its industrial policy, aligning with the Green Deal and forthcoming EU framework on industrial decarbonisation
- Evaluate detailed transition costs and set a clear target for public investment in industrial decarbonisation by 2030, both anchored in concrete and mature decarbonisation plans which must be communicated by industrial operators
- Design and implement a Carbon Contracts for Difference scheme for the cement and steel sectors
- Publish a detailed infrastructure deployment plan, including CO2 transport and storage and hydrogen infrastructure
