To learn more about this topic, download this policy brief.

The recently strengthened European greenhouse gas emission reduction targets in the European Green Deal imply a transformation of the EU’s materials sector. A 55% reduction in the next decade (compared to 1990 emissions) and climate neutrality in only 30 years mean action needs to be taken now as investment cycles in energy-intensive industry extend over decades, and value chains are also not changed overnight.

There has been much debate over whether and how industry could make such changes fast enough, especially given international trade exposure. Policies implemented so far, including the EU Emissions Trading Scheme, have not incentivised much more beyond business-as-usual improvements.

In the debate on policymaking for industry, one governance layer is often ignored: that of industrial clusters. Much of high-emitting industry in north-western Europe is geographically  clustered. In clusters, energy-intensive, heavily fossil fuel-dependent, large-scale plants are co-located and share facilities such as high-voltage electricity and hydrocarbon connections. Clusters are interconnected by infrastructure, in particular transport and pipelines. Clustering of industry tends to improve energy and material efficiency, often called “industrial symbiosis” in the literature. However, for the transformative change needed for the climate goals, clusters can also be a barrier. They are a factor in climate policy success and warrant more attention.

Whether a cluster can help or hinder the industrial transformation depends on many factors, amongst which its governance. In the underlying policy brief, we find that clusters are governed in different ways. Some (mostly chemical clusters) are fully owned by one company and are generally the location of multiple plants and production facilities. This makes decision-making fairly easy. But all clusters in Belgium and the Netherlands are collections of different companies, sometimes of different production sectors, and this is where things get more complicated.

In a policy brief, we investigated the governance of five clusters in the Netherlands and Belgium. The clusters are located in the industrial region spanning Antwerp, Rotterdam, and the Ruhr and Rhine river regions (often called ARRRA), and are connected through a highly developed pipeline infrastructure, transporting key feedstocks and energy carriers such as hydrogen, ethylene and propylene. Some characteristics of the clusters are summarised in the figure.

A map of details on industrial clusters

All clusters investigated acknowledge the need for climate neutrality in 2050. However, each cluster governs the transition to climate neutrality in 2050 in a different way, depending on the industries, history, legal situation and other contextual factors. Four of the five cluster coordination entities are harbour authorities, which tend to be publicly owned (by municipalities and provinces). Part of their work is to coordinate the climate transition. In the North Sea Port, this authority even extends over the Dutch-Belgian border. In Amsterdam and Rotterdam, two harbour authorities are involved in each cluster. Antwerp is most straightforward: a relatively compact cluster under one harbour authority. In Chemelot, the entity coordinating the climate transition is a private organisation governed by the site owners which are multinational companies headquartered around the world. The funding level of the coordinating entities varies as well, depending on their ownership structure. Land ownership in the clusters is another important factor as it could give the coordinating entity some sway over the individual site owners. It is usually in the hands of the cluster coordinating entity (in the Dutch harbour authorities and North Sea Port), sometimes with a single company (in Chemelot the chemical company DSM, for historical reasons), and sometimes with different companies (in Antwerp). The clusters are all subject to slightly different regulatory regimes and deal with multiple public sector layers.

The diversity in cluster governance suggests that tailor-made policy from governments is needed to help the clusters make the transformative changes required for climate neutrality. After all, a publicly owned harbour authority that rents out land to companies and controls key infrastructure is in a better position to develop roadmaps and decide on a common strategy than a coordinating entity that depends on the individual strategies and financial contributions of the companies in its cluster. A key barrier to the climate transformation of clusters is that the time paths of individual companies need to be aligned. This is problematic as they can vary over time as circumstances change and their investment cycles and turnaround (i.e. major upgrades) are generally not coordinated.

The industrial transition to climate neutrality will require coordinated policy interventions, including financial support and regulation, at all levels of governance. These levels include the cluster coordinating authorities (both publicly and privately owned), regional authorities, national government, bodies coordinating between member states, and the European Union. When it comes to financing the transition of climate-friendly production, national and EU levels clearly need to take the lead. The same goes for regulatory interventions to incentivise climate-neutral clusters. Cluster level authorities are however crucial in enabling the transition through e.g. development of local roadmaps and strategies and by investments in cluster climate-friendly infrastructure.

Policymakers need to acknowledge the crucial role as well as the diversity of cluster governance and ensuing challenges. Only by embracing this variation, the tailor-made policy approaches can be developed that can make a climate transformation of industry succeed.

This blog was co-authored by Roos van der Reijden (Radboud University), Heleen de Coninck (Eindhoven University of Technology & Radboud University) , Gauri Khandekar (Free University of Brussels-VUB) and Tomas Wyns (Free University of Brussels-VUB).

The authors contribute to the Climate Friendly Materials (CFM) Platform, analysing the transformation of basic material production and use to achieve carbon neutrality by 2050. Its collective aim is to aid progress toward nationally-led industrial decarbonisation policy frameworks compatible with long-term EU strategy, an to capture the potential of a just and inclusive clean energy transformation.