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European Commission

Janez Potočnik

Commissioner for Environment

European Steel Day

Europe's Industrial Future – Internal and External Challenges

The Square / Brussels

28 June 2012

Ladies and Gentlemen,

This time last week everyone with a stake in sustainable development had their eyes on Rio.

You have probably already heard that there were a number of areas where we hoped for a more ambitious outcome, for instance, with regard to the definition of concrete timelines for achieving goals in priority areas.

At the same time, we got some important results. Acknowledging the important role of the green economy in achieving sustainable development and poverty eradication was an important step in the right direction. The challenge now is to keep up the momentum, particularly of those who were pushing the hardest, and to ensure implementation of what was agreed.

That is why today I will not discuss the difficulties and challenges for the European economy, but I rather say: Let's talk business. Let's focus on the opportunities. Let's talk about resource efficiency, which involves a new partnership between the environment and business breaking down the old polemics in search of new solutions.

In the Europe 2020 strategy, the European Commission put the achievement of greener, more resource efficient, low-carbon growth at the heart of our vision for the EU's growth and development over the coming decade and beyond. Resource efficiency is just as much about energy, transport, construction, manufacturing, agriculture, research and development as it is about the environment.

The Commission is not alone. An increasing number of dynamic businesses are already anticipating or exploiting the benefits of more resource efficient models. McKinsey argue that benefits of resource productivity could amount up to $ 3.5 trillion by 2030. That is in addition to other benefits such as the fact that resource productivity would also take us half-way to achieving our climate goals. Our modelling shows that a reduction of the total material requirements of the economy by 17 % can boost GDP by more than 3 %, and employment in the EU by around 2 and a half million.
An annual reduction of one percentage point would be worth around € 23 billion to business and up to 150,000 new jobs.

I was glad to hear about the immediate support that EUROFER gave to the Roadmap to a Resource Efficient Europe that we proposed in September, and about your readiness to work together to advance the life-cycle approach and closed-loop economy. The steel industry has rightly understood its key role in the transition to a green economy, confirming that that resource efficiency does not mean de-industrialisation; in fact, quite the opposite.

Resources are increasingly important, they account for 40 % of input costs of manufacturing companies (according to some studies). And 87 % of European companies expect material prices to rise in the next five years. This can represent a big opportunity for the steel industry, which has seen more than a fourfold increase in production in the last 50 years, and expects to double it again by 2050.

But, the steel industry has also experienced the downside of the growing interest in resources, since prices of iron-ore have also shown an upward trend and substantial volatility. Industry has been under pressure to increase its efficiency even further.

Some may perceive steel as a material of the past; but I say that it should also be a material of the future. Steel is central to transport, housing, energy, agriculture, water and infrastructure and can contribute to challenges of population growth, urbanisation, poverty reduction and mitigation of natural disasters.

Economic and human development is currently closely linked with the use of metals. And metals will also play a crucial role in the transition to a low carbon economy, since renewable energy production requires a variety of metals to build the very windmills, batteries and solar panels that we need.

But the production of metals is associated with various environmental impacts, such as local impacts of mining, including environmental and health problems due to leaching of toxic substances into ground and surface water and ecosystem degradation. Mining, and especially refining of metals, are also very energy-intensive and currently use 8 % of the total global energy supply.

We know that the best steel plants are already at the technical limit for reducing CO2 emissions – that is one of the reasons why we support the "Ultra - low CO2 Steelmaking" (ULCOS) cooperative research project. But we should also not forget the plants that are lagging behind in terms of efficiency and environmental performance. Current global steel production includes 1.3 billion tonnes of steel, which causes 2.2 billion tonnes of greenhouse gas emissions.

We hope to see – in the near future - technological changes in the sector that will further decouple resource use from growing production – especially in the light of the forecasted doubling of production by 2050. Boosting resource efficiency along the life cycle is an option that can mitigate many of these problems. This includes, for instance a) demand management, b) sustainable sourcing and c) increasing recycling rates.

On demand management, a recent report by McKinsey states that by optimizing design and by using higher strength steel, it is possible to achieve considerable savings in steel consumption. This is about weight reduction in products such as bars (construction sector), automotive parts and machinery.

On sustainable sourcing, - well - sustainable resourcing is crucial, which means that mining activities should respect social and environmental constraints.

And last but not least, steel can be recycled over and over again without loss of quality or its properties. We have a very high steel recycling rate in Europe – about 90 %. Yet, the overall recycling rate of iron is only about 50 %. This is particularly important for the European (EU) steel industry, as Europe imports more than 90 % of the primary raw materials needed for steel production, and we are competing for these raw materials with other big producers such as China. Therefore, better resource use is an imperative for the competitiveness of our steel industry, and for its customers.

One of the milestones of the Roadmap to a Resource Efficient Europe is eliminating landfilling and incineration of recyclable waste. Recycling cannot cover 100 % of the demand for steel because of the growing demand for goods. Today about 42 % of the European consumption of iron and steel is covered by recycling1… This figure could reach around 55 % if all waste were to be recycled.

We already have 5 Member States that have virtually achieved zero landfill for their municipal waste, but many others still bury more than 80 % of their waste – either legally or illegally. Diverting waste to recycling would reduce environmental damage, increase supply and create jobs.

We can, and must, help this market to develop through separate collection, and through quality standards for secondary materials, by promoting recyclability at the design stage and by supporting industrial symbiosis.

Ladies and Gentlemen,

I am convinced that future competitiveness belongs to those businesses that invest early in resource-efficiency-related processes and products. Progressive businesses do not simply aim to adapt to the reality of a finite planet, but to enable and shape the transformation towards the economy of the future based on the principles of "reduce, reuse, recycle, substitute, save and value".

The transition will offer plenty of opportunities, coming from better resource productivity, less waste and energy consumption, more sustainable production methods or consumption patterns. New markets will appear as innovation and new business models come along.

The steel industry has chalked up important successes, but it would be a mistake to stop here. Product innovation, value creation and technological development are our strong points – we have to keep them strong and develop them further.
The steel industry is well positioned to benefit from the transformation in many fields such as construction or transport.

At EU level we have to support this process by exploiting the single market for sustainable goods better. We have to boost the potential for resource efficiency that might hide in the supply chain or in the end of life of products. We are working on methods for assessing the environmental footprint of products or organisations along the entire life cycle in order to help industry improve efficiency where it most matters.

We are also working to create the right conditions. For instance, the removal of harmful subsidies is an issue we have put on both the European and the international agenda. We are convinced that coordinated effort is needed from governments across the globe to end subsidies with negative effects on the efficient use of resources.

It is the private sector that will ultimately need to bring about the economic transformation, turning challenges into business opportunities. I look forward to hearing your experience on the conditions to push the boundaries to achieving sustainability in practice.

Thank you for your attention.

1 :

Current and potential share of recycling for some materials: paper/cardboard: 41 % (potential: 60 %), iron and steel: 42 % (potential >55 %), glass: 14 % (potential 25 %), plastics: 2 % (potential: > 10 %), source: EEA report 8/2011, "Earnings, jobs and innovation – the role of recycling in a green economy", EEA 2011.

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