Growth and increased sustainability

In an effort to encourage the reduction of climate-changing emissions, the European Union approved the European Union Emissions Trading Scheme (EU ETS) in 2009, a tax directly linked to the amount of greenhouse gases emitted by companies. Europe's approach is arguably the most sophisticated, but there are similar schemes either in operation or under consideration around the world. The common goal of such mechanisms is to motivate companies to invest in more sustainable processes or technologies to reduce emissions. However, the vast majority of countries around the world have yet to implement any form of emissions taxation. In terms of the ETS framework, the cost of carbon dioxide emissions has risen from €20 per tonne in 2020 to more than €80 per tonne in 2023. Over the coming decades, this rise will gain momentum as Europe intends to use the ETS system in its commitment to achieve carbon neutrality by 2050.

An unintended consequence of the ETS framework is the phenomenon known as “carbon leakage”, the potential for high-emitting industries to relocate their operations to countries with more lenient environmental standards. If this should happen, it could simultaneously nullify decarbonization efforts and threaten the economies of countries, such as those in Europe, that are committed to reducing emissions.

On 1 October 2023, the Carbon Border Adjustment Mechanism (CBAM) came into force in Europe. The CBAM will gradually ensure that the price of selected imports from outside Europe accurately reflects their carbon impact. The aim is to meet the EU's climate change commitments while maintaining the competitiveness of European companies.

Tackling climate change must go hand in hand with economic and social sustainability. Within the European framework, companies that are able to decarbonize will not have to pay ETS taxes for the emissions they successfully offset. This underlines the key benefit provided by CCUS, which is particularly relevant for hard-to-abate industries. Due to their intensive energy use and inherent production characteristics, these sectors (e.g. iron and steel, cement and brick production, chemicals and paper) have no possibility of using other emission reduction solutions of equivalent effectiveness. For this reason, the IEA's Net Zero to 2050 scenario assumes that by 2050, 80% of cement, 60% of chemical products and 50% of primary steel will have to be produced using emission capture technologies.