2025

The industrial base of Central and Eastern Europe is a key driver of the region’s economy, and its transformation will be essential for maintaining regional manufacturing in the long term. Transforming it will require concerted action by CEE states as well as a regional approach to exploit synergies, improve cost-effectiveness, and cooperate on mutually beneficial solutions. However, to date there has been insufficient action and regional coordination to enable an industrial transformation which capitalises on the region’s strengths. This publication presents a bird’s eye view of the region and its countries, reflects on the opportunities for cooperation, and puts forward concrete suggestions for anchoring the new industrial reality of Central and Eastern Europe in clean industry hubs fit for the future.​ Introduction and aims of this study: Central and Eastern Europe (CEE) has significant potential to become a pole of clean industrial production, but lacks the regional coordination essential for an efficient industrial transformation​ The current nationally siloed approach misses key opportunities to deliver industrial transformation, including coordinated infrastructure planning to leverage key resources across the region, and exploiting a regional market for industrial products​ The need for regional coordination comes in a time of pressure for CEE heavy industry to transform by decarbonising existing manufacturing and enabling new cleantech manufacturing, which will be essential to maintain the regional industrial base long-term, even if it poses challenges in the short-term​ Rising carbon prices, an incoming phase-out of free allowances under the EU Emissions Trading System (ETS), new regulations to nudge the consumption of lower-carbon industrial products, and an aggressive global cleantech race all mean that CEE countries must act now​ At the same time, the industrial policy landscape of the EU is undergoing a massive shift in the wake of Russia’s invasion of Ukraine, which exacerbated the existing pressure of high energy prices, and the 2024 Draghi report, which highlighted major gaps in the EU’s industrial competitiveness further addressed in the recently-published EU Competitiveness Compass​ Competitiveness will be a major driver for industrial transformation in the EU, and the forthcoming Clean Industrial Deal is expected to lay down rules and incentives for decarbonising industrial production in the EU, anchored in competitively advantageous sectors and promoting a coordinated approach​ Given the current context, it will be key for CEE to unlock cost efficiencies for its industrial transformation and align its national priorities to ensure that advancing EU competitiveness does not come at the expense of strategic considerations for autonomy and cohesion​ The purpose of this study is to reflect on the specificities of CEE countries which contextualise their outlook for industrial transformation, and to provide a high-level assessment for the benefits of a regional approach anchored in competitive and strategic industrial clusters​

În urma alegerilor parlamentare din decembrie 2024 și a negocierilor ulterioare, s-a format o nouă coaliție de guvernare compusă din PSD, PNL, UDMR și grupul minorităților. Prezența în coaliție a două partide care au făcut parte și din guvernarea anterioară indică o relativă continuitate la nivel politic, însă nu și în ceea ce privește politicile climatice și de decarbonizare. Acest lucru reiese din programul de guvernare al noii coaliții, publicat la finalul lui 2024, care oferă o privire de ansamblu asupra priorităților la nivel național pentru următorii patru ani. Viziunea noului guvern este influențată inclusiv de noua realitate politică determinată de rezultatele alegerilor parlamentare și anularea alegerilor prezidențiale de către Curtea Constituțională. Deși economia europeană a resimțit puternic efectele pandemiei de Covid-19 și ale crizei energetice, iar discursul global cu privire la schimbările climatice devine treptat mai ostil, Uniunea Europeană și-a reafirmat poziția și intențiile de a fi un lider climatic la nivel global. Noul mandat al Comisiei Europene urmărește să continue procesul de tranziție climatică pentru continent, printr-o abordare pragmatică ce ar îmbina obiectivele de decarbonizare, competitivitate și creștere economică prin revitalizarea producției industriale. Uniunea are deja o țintă de reducere a acestor emisii cu 55% până în 2030 și urmează să adopte o țintă pentru 2040, pornind cel mai probabil negocierile de la o țintă de reducere cu 90% a emisiilor. Aceste ținte ambițioase trebuie, însă, cuplate cu nevoia de creștere a competitivității industriale, sinonimă cu transformarea proceselor de producție și lansarea de noi industrii  ale tehnologiilor curate. Așadar, dezvoltarea economiei și reindustrializarea României ar trebui să meargă în tandem cu aceste angajamente, poziționând România ca un lider în tranziția spre o economie curată. Aceste obiective însă nu pot fi atinse fără un program ambițios de investiții publice și scheme de susținere, care sunt necesare într-o perioadă cu spațiu fiscal redus la nivel național. Actualul program de guvernare nu reflectă pe deplin aceste provocări și priorități.  Guvernanța schimbărilor climatice, pe plan secund în lista priorităților de guvernare La momentul actual, România se află în plin proces de aderare la Organizația pentru Cooperare și Dezvoltare Economică (OCDE) cu obiectivul de a deveni membru până în anul 2026. În anul 2024, OCDE a recomandat întărirea sistemului de guvernanță climatică prin adoptarea unei legi cadru a climei și înființarea unui consiliu științific consultativ pentru schimbări climatice. Aceste recomandări au fost integrate în programul de guvernare 2023-2024, însă au fost doar parțial implementate: înființarea unei legi a climei nu s-a concretizat, iar recomandarea privind consiliul științific consultativ a avut un parcurs anevoios până la legiferare, nefiind nici acum înființat. Astfel, aceste obiective, deși asumate de fostul guvern, rămân nerealizate.  Schimbările climatice sunt menționate sporadic în noul program de guvernare, iar adoptarea unei legi-cadru a climei nu mai este menționată. În domeniul schimbărilor climatice, noul guvern își propune doar continuarea asigurării surselor de finanțare pentru „implementarea proiectelor actuale în domeniile reducerii de emisii și adaptarea la schimbările climatice, în contextul îndeplinirii de către România a obligațiilor privind reducerea emisiilor de gaze cu efect de seră”. Această formulare vagă lasă semne de întrebare, mai ales având în vedere că țintele de reducere a emisiilor de gaze cu efect de seră diferă între documentele principale de planificare climatică strategică, Strategia pe Termen Lung a României de Reducere a Emisiilor de Gaze cu Efect de Seră, (SLT) și Planul Național Integrat pentru Energie și Schimbări Climatice (PNIESC).  STL, care setează obiectivele și programele României pentru abordarea schimbărilor climatice pe termen lung, este deja învechită. Neconcordanța acestei strategii cu PNIESC, recent actualizat, evidențiază lipsa coerenței între politici, pe care o lege cadru a climei ar putea-o rezolva. Pe lângă această abordare insuficientă a atenuării schimbărilor climatice, nici adaptarea la schimbările climatice nu beneficiază de mai multă atenție. Impactul schimbărilor climatice este din ce în ce mai vizibil, dar nu există referințe clare la implementarea Strategiei Naționale de Adaptarea la Schimbările Climatice, care fără o susținere politică puternică riscă să întâmpine deficiențe de punere în aplicare. Programul de guvernare prezintă lacune și în ceea ce privește impactul socio-economic al politicilor climatice, și conștientizarea publicului asupra acestuia. Spre exemplu, coaliția nu prezintă un plan pentru a gestiona potențialul impact asupra cetățenilor al noului sistem de comercializare a certificatelor de emisii (ETS2), adoptat la nivel de Uniune în 2023, ca parte a revizuirii directivei ETS. Această directivă prevede, în esență, impunerea unui preț asupra emisiilor de CO2 care rezultă din consumul de combustibili fosili în sectoarele transportului rutier și al clădirilor. Atenuarea impactului asupra consumatorilor vulnerabili este prevăzută la nivel de Uniune printr-un Fond Social pentru Climă (FSC), care ar urma să fie gestionat de statele membre prin Planuri Sociale pentru Climă. Programul de guvernare menționează doar că 30% din fondurile din FSC alocate României vor fi distribuite până în 2028, fără a oferi alte detalii. ETS2 este un instrument cu beneficii importante la nivelul UE (reducerea emisiilor cu 42% până în 2030), astfel contribuind la atenuarea schimbărilor climatice și stimularea adoptării de alternative cu emisii reduse de CO2 în gospodării și în transportul rutier. Potențialul impact al ETS2 asupra gospodăriilor, chiar dacă nu va fi dramatic în primii ani, riscă să creeze probleme de acceptare socială cu privire la necesitatea unor astfel de politici climatice. Fondul Social pentru Climă reprezintă o oportunitate pentru decidenți de a răspunde mai multor provocări socio-economice existente. Măsurile desemnate ar putea preveni potențialul impact asupra celor vulnerabili în urma introducerii ETS2, dacă sunt formulate și țintite corespunzător în urma unui dialog constructiv cu publicul și părțile interesate. În general, dialogul cu publicul despre politicile climatice trebuie ancorat în cele mai noi dovezi științifice, întărind legitimitatea măsurilor climatice la nivelul opiniei publice și contracarând narativele false și dezinformarea. O mai bună utilizare a expertizei științifice, spre exemplu prin consiliul consultativ pentru climă, ar putea contribui la îmbunătățirea politicilor climatice prin intermediul consilierii independente a experților și sporirea capacității instituționale. Programul de guvernare menționează doar susținerea cercetării în domenii strategice și provocări societale precum schimbările climatice, dar nu menționează concret ariile de cercetare și integrarea acestei munci în procesul de dezvoltare de politici publice. Reindustrializarea economiei...

District heating (DH) systems provide multiple economic and environmental benefits. Their inherently high efficiency contributes to lowering the cost of heating in dense urban areas and industrial centres. The combined production of heat and power (CHP) leads to higher fuel efficiency and lower emissions of greenhouse gas and local air pollutants. The role of DH systems in decarbonising heat supply has been strengthened in the recent revision of EU energy and climate legislation. The Energy Efficiency Directive and the Energy Performance of Buildings Directive introduced new requirements for efficient district heating and cooling systems, which determine eligibility for certain types of public funding. Additionally, they mandate municipalities with more than 45,000 inhabitants to develop strategies for district heating. Romania, with its extensive DH network of over 4,380 km and approximately 1.05 million customers, should be well-positioned to reap the benefits of centralised heating. However, decades of infrastructure neglect, uneconomic business models dependent on public subsidies, and outdated system design have resulted in consistent decline of connections to the DH networks. The regulated prices of heat have relied on subsidies to cover operational costs and shield consumers from higher prices. This has strained local budgets and left little room for financing the necessary maintenance works, which increased the network losses. Out of the 10.7 TWh of centralised heating produced in 2022, only 6.7 TWh was sold to consumers – energy losses and operational consumption have therefore accounted for no less than 38% of the energy produced. The highest losses were recorded in Constanța, Iași, and Arad, cities with some of the lowest shares of households supplied by the local DH networks. The system was operated most efficiently in Râmnicu Vâlcea, which is also the municipality with the highest share industrial heat consumption from its DH network. As DH operators have been unable to bankroll their own investments, they have come to rely on investments from EU funding and different types of public support. While most infrastructure retrofitting has been funded by governmental and EU grants, the investments implemented so far often lack strategies for reducing fossil fuel use and integrating modern renewable technologies, heat pumps, and waste heat. Meanwhile, several European cities have already pioneered initiatives to store thermal energy, capture and use energy from wastewater, deploy heat pumps, and integrate renewable energy and waste heat. The strategies implemented at the local level for thermal energy provision within the 11 municipalities analysed in this paper show an overwhelming focus on maintenance and refurbishment of existing networks. These priorities are coupled with investments to replace existing thermal plants with new gas-fired CHPs. This reliance on gas can be partially explained by Romania’s anticipated expansion of natural gas supply, but such investments can only lead to incremental emissions reductions and fail to account for the long-term evolution of fossil fuel and carbon prices, and larger EU-level shifts in primary energy demand. Multiple actions are needed to more effectively address current challenges and prepare the Romanian DH systems for the future: Adopt clear and ambitious national and local strategies for district heating and cooling. Such plans should outline a clear vision for the refurbishment, decarbonisation and even potential expansion of DH systems. The latter is particularly important given the upcoming expansion of carbon pricing to cover residential heating. Local authorities should be more ambitious in promoting plans aimed at maximising the use of locally available renewables, reusing waste heat, and developing heat storage solutions. To maximise impact, such strategies should be complemented by ambitious building renovation plans.   Identify and remove legislative and regulatory barriers. Focus on enabling the implementation of new technologies that facilitate system integration, reduce limitations on the autonomy of local municipalities, improve data transparency, and enable private entities to participate more actively in the market. Gradually channel investment towards cleaner energy sources. While some investment in gas-fired CHPs is urgently needed for the short term to continue the uninterrupted supply of heat, decarbonised solutions are needed to ensure the long-term viability of these plants. Partially switching to hydrogen or biomethane may be implemented in some locations, but this requires clear roadmaps for how such fuels will be produced, transported, and stored. In the medium- to long-term, DH networks should incorporate solutions such as large-scale heat pumps, renewable energy (including geothermal), waste heat (metro stations, industrial halls, data centres, etc.), and heat storage to the maximum extent possible. With rising temperatures in urban areas during the summer, district cooling solutions should also be pursued. Improve the business model and fund investments in new technologies. A careful balancing act is needed to both gradually expose consumers to price signals in order to reduce reliance on subsidies and shield households from unaffordable heating prices. In the short- to medium-term, most investments will still need to be funded through public grants, including from EU funding sources. These investments will need to prioritise the refurbishment and modernisation of heat distribution infrastructure, as well as fund pilot projects which implement innovative technologies. Gradually, public funding should be made available increasingly through loans and state-backed guarantees to maximise the number of beneficiary municipalities. The long-term objective should be to develop financially self-reliant systems. Alexandru Ciocan, EPG Senior Researcher Alexandru CIOCAN become a member of the EPG team at the end of 2023 and started working as a Senior researcher in the Energy System Programme. Previous he has working extensively for almost 10 years in the field of hydrogen-based technologies, renewable energies sources and lithium-ion batteries. Between 2012 and 2021 he held various research positions at the National R&D Institute for Cryogenic and Isotopic Technologies – ICSI Rm. Valcea. Nevertheless, Alexandru gained experience in the energy policy, following his contribution to the national strategic documents from the position of Senior Advisor within the Energy Policy and Green Deal Department into the Ministry of Energy of Romania between 2021 – 2023. Since 2017 Alexandru holds a PhD in engineering sciences from the IMT Atlantique as well as the University Politehnica of Bucharest. Contact: alexandru.ciocan@enpg.ro

The revisions of EU legislative files, aligning with the net-zero emissions target for 2050 and the 55% net emissions reduction by 2030, are ushering in opportunities for the building sector to accelerate emissions reductions through increased energy efficiency and decarbonisation measures. Driven by advancements in energy efficiency and low-emissions HVAC systems, the building sector has shown significant untapped potential for decarbonisation.  To meet the updated energy efficiency targets, Romania must prioritise and accelerate the depth and pace of building renovations, focusing on upgrading the least energy-efficient buildings (classified as E, F, and G) to achieve higher performance ratings of class B or A. At least 16% of the building stock, starting with the most inefficient structures, should undergo these renovations.  Achieving the 2030 targets will require a substantial increase in renovation rates. In the residential sector, the current rate of 0.5% must rise to 2.5% by 2025 and 4% by 2045, while in the non-residential sector, the renovation rate must reach 2.4% by 2025 and 3% by 2030, stabilising at this rate through 2050. The role of municipal actors in delivering these targets has grown in importance. Setting realistic and achievable goals for heat pump adoption, alongside reevaluating energy consumption projections under the NECP, is critical for the clean transition in the built sector.  Constantin Postoiu, EPG Head of Data Analytics Constantin Postoiu is the Head of Data Analytics at EPG, coordinating the process of collecting, processing and managing the data needed in EPG’s research projects. In addition, he coordinates data intensive projects that need advanced statistics or modelling techniques.  For the past nine years, using extensive knowledge in data analysis, Costin provided support for data-driven decision making both in the public and private sector. He is also a member of the Consultative Council for the Impact Assessment of Normative Acts (CCEIAN) within the Romanian Government, where he analyses the compliance of the supporting documents that accompany the draft normative acts, the impact studies and the reports on the implementation of the normative acts with the requirements and standards provided by the legislation in the field of impact assessment. Costin holds a PhD in Economics, thesis Endogenous regional growth in Romania, from the Bucharest University of Economic Studies. During this time, he published several papers on refereed journals, mostly on regional development. He also holds a Master and Bachelor in Economics from the Bucharest University of Economic Studies. Contact: constantin.postoiu@enpg.ro

The energy sector of Romania is transitioning from an emission-intensive power generation towards less carbon-intensive methods of electricity production. Natural gas power plants, relying on gas turbines, are seen by many as an intermediate step to a fully decarbonised energy sector. Significant natural gas-based power generation is currently under development in Romania. These projects have been included in the country’s strategic plans and consist of the development of at least 3.5 GW of CCGT power plants until 2027. While gas combustion emits less CO2 than coal, these capacities would still be important emission sources. To overcome this, these new installations are expected to become “hydrogen ready”, so that they can initially be fuelled with natural gas and, from 2036 onwards, switch to a blend of 50% natural gas / 50% hydrogen. A brief description of the two power plant configurations relying on gas turbines reveals the fact that Open Cycle Gas Turbines (OCGT) are generally better suited than Combined Cycle Gas Turbines (CCGT) for ensuring power grid balancing. While CCGT power plants are more efficient, they are adequate for baseload energy production, as their startup time is much longer. The degree to which a gas turbine can be considered hydrogen ready can be measured by the proportion of hydrogen to be blended with natural gas and the cost of system upgrade, as a function of the overall power plant cost. Such gas power plants can be partly financed from the Modernisation Fund, provided they are in line with the provisions of the EU taxonomy for sustainable finance. There are two criteria that can be used for demonstrating sustainability. The CCGT units to be developed in Romania seem to target a criterion relying on an upper GHG emissions limit over a period of 20 years plus additional conditions. The evaluation of the LCOE for a generic CCGT/OCGT system developed for meeting the EU taxonomy requirements, similar to the capacities to be developed in Romania, point to more than 100 €/MWh for CCGT and more than 200 €/MWh for OCGT. This baseline LCOE value can be negatively impacted by the price of hydrogen and by the cost of hydrogen storage. For the Romanian CCGT projects, the LCOE is around 115-122 €/MWh should natural gas be used for the entire life of the power plant and 135-140 €/MWh should the switch to hydrogen occur in 2036. The maximum LCOE can be as high as approx. 186 €/MWh for a pessimistic scenario in which the price of hydrogen is high. The main recommendations of this report focus on better explaining theneed and opportunity to develop 3.5 GW worth of CCGT in Romania. Indeed, such projects can serve as a short- and medium-term solution, especially as RES and storage capacities continue to grow, there is a need for clarity regarding their longer-term prospects. This is especially important for projects of national interest, like the Mintia CCGT, which present some differences from the data in the NECP. Notably, the estimated load factor, significantly higher than the one from the NECP, may envisage a higher than anticipated gas share in the energy mix, potentially preventing Romania from meeting the decarbonisation targets set in the plan. More clarity is required regarding the hydrogen to be used for powering these plants starting with 2036: the source of hydrogen, the associated transport and storage infrastructure, its production path, the LCOH. The relatively high cost of energy produced by the expected CCGT capacities poses a financial risk on the long run. As this cost is significantly higher than the current cost of renewable energy and as RES continue to become cheaper, investment in new CCGTs may not be fully recovered. Radu Cîrligeanu, EPG Senior Researcher Radu works as a Senior Researcher in the Energy Systems Programme of EPG, focusing on the role of hydrogen in the energy mix.  Radu is an aerospace engineer, specialized in propulsion. He holds an MSc. degree from Cranfield University (UK) in Thermal Power, with a focus on aircraft propulsion. He has more than ten years of experience in the field of aerospace engineering. He worked as gas turbine performance engineer at Rolls-Royce, in the UK, both for civil and military applications. He also acquired experience in the development of novel thermal and hybrid propulsive cycles at Safran Tech, the R&D department of Safran, in Paris. Radu is convinced that the solution to developing a more sustainable society is not novel technology, but its development and implementation greatly speeds up the process.  Contact: radu.cirligeanu@enpg.ro