This briefing presents key air pollutant trends and projections for energy-intensive industries in Europe. It also discusses greenhouse gas (GHG) emission trends over the past two decades. It outlines technology pathways and opportunities for industrial transformation related to zero pollution, decarbonisation and circularity in the context of the Clean Industrial Deal (CID).
Challenges and opportunities for the energy-intensive industries in Europe
Energy-intensive industries are vital for the EU economy. They produce intermediate goods that are essential across numerous value chains — including those critical for the green transition, EU security and international trade. Together, these sectors account for 19.7% of GVA in EU manufacturing (Eurostat, 2025a). However, they also typically use high levels of energy, accounting for more than 60% of total energy consumption across all the manufacturing sectors (Eurostat, 2025b). This vulnerability has negatively impacted their competitiveness during the EU energy crisis, compounding existing challenges related to weak demand and global overcapacity in sectors such as steel. In the EU, electricity still costs two to four times as much as it does for the EU’s main trading partners (EC, 2025a).
Given the strategic role of these sectors in strengthening the EU’s independence in a volatile political climate, tailor-made action plans have been developed under the CID to strengthen their competitiveness. The CID also recognises the role of decarbonisation in driving sectoral growth.
As highlighted by this briefing, energy-intensive industries account for not only a significant share of GHG emissions but also other key air pollutants which have a substantial external cost to EU society. Supporting transformation in these sectors towards decarbonisation, pollution prevention and circularity would therefore offer multiple benefits for the environment and public health, while strengthening the EU’s overall competitiveness by reducing societal costs.
This briefing presents the progress made over the past two decades, explains why further progress is needed and highlights the importance of considering the opportunities and risks of various transformation pathways.
For the purposes of this briefing, ‘energy-intensive industries’ refers to sectors classified under NACE codes 17, 20, 22, 23 and 24. They are:
- iron and steel;
- cement and lime;
- aluminium;
- pulp and paper;
- glass and clay;
- chemicals.
External cost of air pollution and GHG emissions
Despite progress in reducing emissions and EU frameworks/1 to address externalities from industrial activities, the costs of industrial activity remain high.
The European Environment Agency (EEA), together with the European Topic Centre for Health and Environment, uses an impact pathway approach to estimate these costs. This approach estimates ‘marginal damage costs’ per metric tonne for key pollutants. These have been used to estimate the external costs of energy-intensive facilities using emissions data from the European Industrial Emissions Portal.
According to the EEA (2024a), external costs from energy-intensive industries fell by 23% from 2012 to 2021. Yet in 2021 they still amounted to over EUR 73 billion (see note on potential underestimation of this figure under Map 1). The majority of these costs are linked to impacts on human health. The non-metallic minerals sector (cement, lime, glass and ceramics) accounted for the largest share of external costs at 31% of the EUR 73 billion, followed by ferrous metals (24%) and chemicals (19%).
Across all the energy-intensive sectors, carbon dioxide (CO2) was responsible for 58% of the external costs, NOX 12% and sulphur dioxide (SO2) 11%. These three substances are also responsible for the highest external costs in the non-metallic minerals sector.
The map below illustrates various high-cost hotspots across Europe. It highlights both the uneven burden of external costs associated with key air pollutants and the importance of region-specific policies and measures.
The hotspots can be found in Flanders, northern France, the Ruhr area and parts of Poland. There are other facilities with high external costs in northern Spain, southern Italy, southern France, the Netherlands and central Germany. Some countries, including Czechia and Slovakia, are missing from the analysis.
Map 1. External costs of air pollution and GHG emissions from energy-intensive facilities, 2021
GHG and air pollutant emissions from energy-intensive industries
Data on industrial emissions can help guide the design of targeted abatement policies and measures. Relevant knowledge includes the share of emissions for each pollutant from energy-intensive industries in comparison with other sources, as well as each sector’s individual contribution to these pollutants.
Energy-intensive industries account for just under 27% of total industry GHG emissions (CO2e), while they contribute over 63% of Pb, 56% of total PAHs, 35% of SOX and 31% of NOX (Figure 1). Notably, the share of various pollutants emitted by energy-intensive industries — compared to total industry emissions — is often higher than their share of total GHG emissions.
The iron and steel sector stands out as the largest source of several key pollutants in a sector-specific analysis. These pollutants include cadmium (Cd), copper (Cu), mercury (Hg), Ni, Pb, dioxins, total PAHs and zinc (Zn). For Pb, total PAHs and Zn, the sector contributes as much as 43%, 45% and 40% of the total emissions from all energy-intensive industries, respectively. Meanwhile, the chemicals sector — followed by pulp and paper — is the main contributor across the energy-intensive sectors of non-methane volatile organic compounds (NMVOCs). Cement production is the leading source of NOX and SOX (Figure 1).
These differing emissions profiles highlight the need for sector-specific measures to address the most critical sources of pollutants, whether they derive from combustion, feedstock impurities, the handling of raw materials or chemical processes within a plant.
Considering GHGs and air pollutants together also makes it possible to identify measures that can address multiple pollutants. For instance, clinker substitutes in the cement sector — depending on the material used — can mitigate emissions of CO2, Hg, Pb, SOX, and to some extent NOX and fine particulate matter (PM2.5) – all for which cement production is a key emitter. Similarly, electrifying the production of process heat — such as through electric furnaces in the steel sector — can reduce GHG emissions while also lowering emissions of relevant pollutants like SOX at the stack level.
Figure 1 gives an overview of the sectoral shares of pollutants emissions from energy-intensive industries. The proportion of emissions from the power sector and refineries is included for comparison and is represented as a dotted line under ‘Energy supply’.
Figure 1. CO2e and other pollutant emissions by energy-intensive industries as a percentage of industry total for the EU-27, 2023
Significant progress in emissions reductions followed by recent stagnation
There has been substantial progress in reducing emissions from energy-intensive industries over the past two decades. Significant decreases have been observed in GHGs and all the assessed air pollutants, though there has been some stagnation and fluctuation in year-on-year emissions. Figure 2 shows the sectoral emissions trends for GHGs and key air pollutants between 2005 and 2023.
Air pollutants: The largest decreases can be seen in NOX emissions (-1,056kt representing a 55% decrease), SOX emissions (-1,010kt representing a 63% decrease), dioxins (-62%) and Ni (-64%). Despite these reductions, the relative share of emissions from energy-intensive industries compared to the industry total (which, in this briefing, includes the power sector) remains high for key pollutants.
In 2023, energy-intensive industries were responsible for between 5% and 63% of selected major air pollutant emissions from industry as a whole in the EU. Emissions decreased at different speeds depending on the pollutant and sector. Of these, NMVOCs are notable for having decreased less than 10% since 2005 in the cement and lime, and pulp and paper sectors, whereas SOX have decreased significantly across all energy-intensive sectors.
GHG emissions: According to inventory data, GHG emissions from energy-intensive industries fell by 42% between 2005 and 2023. Over the same period, these GHG emissions remained broadly stable as a share of the EU total, declining only slightly from 16% to 14%. The largest cuts in GHG emissions over this period came from the chemicals sector, followed by aluminium, and pulp and paper; these sectors each reduced their GHG emissions by about half.
When looking at the pace of progress over time, GHG emission reductions stagnated somewhat in several sectors from 2013 to 2021, compared to the period from 2005. It should be noted that this does not take into consideration the emissions associated with purchased electricity.
In the last two years there has been a more noticeable decrease in GHGs and most pollutants, especially in the aluminium, pulp and paper, and chemicals sectors. GHG emissions in those three sectors decreased by 49%, 45% and 51%, respectively, between 2005 and 2023. Combustion-related pollutants such as NOX and SOX have decreased similarly to GHGs in these sectors in the last two years.
Although it is difficult to attribute these reductions to specific drivers, one notable pattern is that the combined GVA of energy-intensive industries (Figure 2) remained broadly stable while emissions fell, indicating a positive decoupling from economic activity within the sectors. While GVA is not a direct measure of physical output, this divergence nonetheless reflects fuel and process-driven improvements. However, the post-2020 decline in GVA coincides with more pronounced emission reductions in most sectors, pointing to an increasing role of structural economic shifts
Figure 2. Historical EU GHG and air emission trends in selected energy-intensive industries, 2005-2023
Policy developments and impacts for industrial transformation
The two policies with the most direct impact on the environmental performance of energy-intensive industries — the Industrial and Livestock Rearing Emissions Directive (IED) and EU Emissions Trading System (EU ETS) — were revised in 2024 and 2023, respectively.
A revised IED to strengthen industrial transformation
The objective of the revised IED (IED 2.0) is to prevent and reduce industrial emissions of pollutants to air, water and land, including NOX, SO2, PM2.5 and NMVOCs. It further aims to improve resource efficiency and to promote the use of less hazardous substances, a circular economy and decarbonisation. The IED 2.0 sets a framework for issuing permits based on Best Available Techniques (BATs) and consistent environmental requirements for operators.
A key feature of the IED 2.0 is its additional flexibility in issuing permits; the aim of this is to stimulate the adoption of emerging techniques and achieve ‘deep industrial transformation’ to contribute to a sustainable, clean, circular, resource-efficient and climate-neutral economy. The European Innovation Centre for Industrial Transformation and Emissions (INCITE) was established in 2024 to support this process by identifying and mapping emerging technologies.
In addition, sectoral reference documents — also known as BAT reference documents or BREFs — will be developed and updated in the coming years. Current versions include BAT-associated emission levels, except for greenhouse gas emissions which are regulated under the EU ETS. The documents are now expected to include ‘environmental performance limit values’ and benchmarks for industrial installations. These will enable more comprehensive BAT conclusions to be drawn.
The Industrial Emissions Portal Regulation requires collection of data from industrial operators on their water, energy and raw material consumption from 2028. These data will complement information on industrial emissions to air and water, waste transfers and production volumes, thereby strengthening transparency and enabling more systematic assessment of industrial resource use and impacts.
Air pollutant emissions are expected to decrease significantly with strong policy implementation
According to a 2023 analysis (Logika Group and IIASA, 2023), full implementation of BAT measures in energy-intensive industries would result in significantly higher emissions reductions for SO2 (over 74%) and NOX (over 70%) by 2050 than a business-as-usual (BAU) scenario, using 2020 as a baseline year (Figure 3). For PM2.5 and NMVOCs, less significant emissions reductions are expected — 55% and 35%, respectively. For these pollutants, additional measures are required and policy implementation needs to be strengthened to align with the EU’s zero pollution vision for 2050.
The analysis also revealed that the decarbonisation of industrial and electricity sectors is expected to play a significant role in reducing air pollution during this period (Logika Group and IIASA, 2023). Although the electricity sector is outside the scope of this briefing, it is referenced here because its decarbonisation is an enabler of the green transformation of other industrial sectors. For instance, many industrial processes, especially those requiring low- to medium-temperature heat, can be electrified using technologies like heat pumps and electric boilers. These technologies are more energy efficient and can significantly reduce reliance on fossil fuels.
Figure 3. Potential impact of the IED 2.0 on future air pollutant emission trends from energy-intensive industries, 2020-2050
The EU ETS as the main driver of decarbonisation in energy-intensive industries
Implementing BATs may result in co-benefits for GHG emission reduction — though the potential contribution has not been quantified. Industrial installations covered by the IED 2.0 — relevant for more types of industrial activities than those considered energy intensive — account for 40% of all EU GHG emissions (EC, 2025c). However, the EU ETS remains the most significant policy for decarbonising energy-intensive industries in a cost-effective manner.
The EU ETS sets a price on emissions and implements a gradually decreasing cap on emissions from large industrial installations. Through this mechanism, it aims to encourage operators of energy-intensive industries to lower their GHG emissions. Improvements can be made through energy efficiency, the adoption of low-carbon energy sources and electrification. Energy-intensive industries have been exempted to a certain extent; they receive free allowances to enable the transition to take place gradually and to address the risk of carbon leakage. A less generous allocation of free allowances creates a stronger incentive to reduce emissions (Dechezleprêtre et al., 2023).
In October 2023, new rules were adopted requiring climate neutrality plans. Under these rules, the industrial operators of the 20% of installations which are least efficient must prepare a plan for how they will reduce their emissions. They will then be granted free allocation of emission allowances at the full benchmark level, which reflects the performance of the most efficient installations in the sector. Free allocation will be phased out entirely by 2034 for sectors covered by the Carbon Border Adjustment Mechanism, including steel, cement and aluminium.
Opportunities for strengthened regulatory support for circularity
Energy-intensive industries are not currently subject to quantitative targets for material recycling and recovery (beyond the EU-wide recycling targets for downstream products such as paper and cardboard, glass, aluminium, steel products from post-consumer waste and other product groups). This means that there is no strong regulatory signal for industry to invest in circular production routes and limited integration of circularity in industrial decarbonisation pathways.
Circular economy policies — including the upcoming Circular Economy Act, the Packaging and Packaging Waste Regulation and the revised End-of-Life Vehicles Directive — aim to improve supply and demand for secondary raw materials and to create better-functioning markets for these materials. In turn, this should increase the share of such materials being used as input materials for energy-intensive industries.
The Critical Raw Materials Act also includes ambitions to increase circularity, for example by introducing benchmarks for recycling capacity with the aim of increasing the share of strategic raw materials supplied through recycling.
The new-generation BATs, as defined in the IED 2.0, will aim for quantitative targets for resource efficiency at the sectoral level. They may also allow environmental performance limit values to be set; these would better incorporate circular economy principles and be reflected in permit conditions.
Synergies for industrial decarbonisation, zero pollution and circularity
The Clean Industrial Deal was launched in February 2025. It positions industrial decarbonisation — and to some extent circularity — as a strategic lever for competitiveness. A broad range of instruments in the CID aim to boost the production of EU-made cleantech, mobilise funds for industrial transformation and reduce energy costs, among other things.
The deal will enhance industry’s access to clean energy and address affordability issues to incentivise electrification. These measures will contribute to the positive impact that fossil fuel phase-out has already had on preventing emissions and air pollutants.
The CID includes commitments to streamline and speed up permitting, helping to accelerate the deployment of cleaner fuels, electrification or cleaner production processes in energy-intensive industries. By embedding robust environmental safeguards within the mechanisms for procurement, funding and issuing permits, the deal can promote an integrated approach that aligns industrial transformation with pollution prevention and broader environmental goals.
The Clean Industrial Deal offers an opportunity to optimise industry’s transition to strengthen the competitiveness and resilience of the EU economy; it also has positive implications for air pollutant co-benefits. Research consistently shows that the societal benefits of avoiding air pollution often outweigh the costs of pollution control measures (EEA, 2024a; CREA, 2023).
According to a recent study from the European Commission (EC) (EC et al., 2025), setting permit conditions at the strictest achievable levels under the IED 2.0 could deliver annual benefits of around EUR 27 billion. This far exceeds the benefits of applying less stringent emission limits or granting derogations that fall short of the IED 2.0’s full potential.
Meanwhile, pollution control and prevention in the EU represents a major investment gap. Member States currently underspend on this by EUR 35 billion per year (EC, 2025b). Given that resources are limited, a cost-effective strategy would be to maximise synergies between climate mitigation, pollution prevention and circularity.
An approach like this would need to anticipate trade-offs and unintended impacts to mitigate resource conflicts or burden-shifting. Historical sector-level data show how these dynamics can be complex. For example, in the pulp and paper sector, emission intensity dropped by 70% for Ni and SOX between 2000 and 2021, while increasing for dioxins and NMVOC’s. This illustrates how technological shifts can present trade-offs between pollutants.
The table below summarises key technological pathways along with associated synergies and challenges, focusing on technological measures at the facility/production level. It does not take into consideration upstream or downstream solutions across the value chain for energy-intensive sectors, such as demand-side measures, sustainable design and circular business models. It is important to keep in mind that pathways and technological options have different feasibility and relevance depending on the specific sector.
Table 1. Selection of key technological pathways for greening energy-intensive industries
Pathway | Examples | Synergies | Risks/Challenges |
|---|---|---|---|
Electrification |
|
|
|
Alternative fuels |
|
|
|
System optimisation and efficiency |
|
|
|
Alternative feedstock and materials |
|
|
|
Circularity |
|
|
|
Carbon removals |
|
|
|
Pollution management |
|
|
|
Sources: EU sectoral transition plans and strategies (see reference list)
Selected examples of synergies and risks associated with specific pathways are elaborated below to illustrate the context-specific dynamics.
Coal phase-out: Phasing out coal as a fuel has reduced and continues to reduce GHG emissions. Coal phase-out also leads to lower levels of air pollutants such as SO2, NOX and particulate matter (PM). However, coal is also used as a feedstock in industry. In fact, the steel industry’s reliance on coking coal contributes indirectly to methane (CH4) emissions, primarily through coal-mining activities. CH4 is a potent GHG and a precursor of ground-level ozone, causing respiratory diseases and premature deaths. Reducing the use of coking coal, for example by switching to hydrogen-based steelmaking, has the potential to mitigate various negative health and environmental effects (EEA, 2025d).
Alternative fuels (biomass): Increased use of biomass can elevate PM2.5, NOX and ammonia (NH3) levels (Zauli-Sajani et al., 2024; Wood E&IS GmbH, 2021). In fact, while it is projected that total emissions from sectors regulated by the IED 2.0 will decrease, the rapid increase in biomass combustion is expected to contribute to an overall increase in SO2 and NOX emissions in sectors such as cement, lime and glass production (Logika Group and IIASA, 2023). As such, while balanced biomass use can help to reduce GHG emissions it may still result in or even increase emissions of other pollutants. As highlighted by the EU’s new bioeconomy strategy it may be better to promote high-value uses of biomass, such as bio-based materials, rather than its use for fuel.
Alternative feedstock/circularity: In order to achieve transformational decarbonisation of energy-intensive sectors, the energy supply and process-related emissions must both be addressed. For instance, 60% of GHG emissions from the cement sector are released in the chemical process of limestone calcination (JRC, 2023). Opportunities related to alternative production processes and materials — such as reducing the clinker-to-cement ratio — result in co-benefits beyond decarbonisation, like reduced limestone extraction, decreased air pollution from reduced kiln use and enhanced circularity of industrial by-products. One of the aims of circularity is to promote long-lived products, slowing material cycles and lowering demand for virgin resources, while cutting energy use and the associated emissions (EEA, 2024d).
Carbon capture: Carbon capture and storage (CCS) can offer certain air pollution co-benefits. However, it may also increase emissions of pollutants such as PM and NOX due to the extra energy required by the process. In addition, emissions of NH3 could increase by a factor of three or more as a result of the degradation of amine-based solvents used in CO2 capture (EEA, 2020). Currently the most common and widely deployed CCS uses amine-based solvents.
However, newer solvent systems aim to reduce such emissions. Emissions could be abated through pre-combustion CCS or simultaneous investments in desulphurisation and denitrification technologies which could be taken into consideration in the total cost of the technology. While CCS is technically feasible and several pilot and commercial projects exist, its deployment in energy-intensive industries remains limited. Widespread adoption is still constrained by high costs, infrastructure requirements and regulatory hurdles.
Conclusions
While the EU advances parallel policies on reducing pollution, mitigating GHGs and enhancing circularity for energy-intensive industries, it is crucial that the impacts of various pathways towards these goals are fully understood and exploited to maximise synergies. The Clean Industrial Deal offers a strategic framework to support decarbonisation and circularity efforts; integrating pollution prevention more explicitly will maximise the societal benefits — with an estimated value of billions of euros annually — while also addressing significant investment gaps in pollution control.
Historical evidence demonstrates that technological shifts typically provide co-benefits but can also create trade-offs between pollutants, underscoring the need for careful, sector-specific approaches. Decarbonisation policies and project support should aim to identify solutions with the greatest potential to deliver co-benefits for pollution prevention and circularity. Such solutions and pathways will help to avoid missed opportunities to reduce emissions at the lowest possible cost. An integrated perspective could be further extended when determining funding criteria for projects, developing new frameworks for issuing permits, or setting sustainability standards and procurement criteria for products such as low-emission steel.