Recent political guidelines published by European Commission President Ursula von der Leyen include multiple references and provisions that could advance electrification efforts, including an Industrial Decarbonization Accelerator. The following incremental measures would further strengthen the business case for electrification: Consider advancing proposed revisions to the Energy Taxation Directive Initially proposed by the European Commission in 2021, revisions to the EU Energy Taxation Directive are currently under consideration. The proposed changes would impose taxes on fuel based on their energy efficiency and environmental impact rather than their volume. The taxation could prioritize minimizing taxes on electricity compared to other fuels and energy carriers. While these proposals have yet to be adopted, this approach could enhance the competitiveness of electrification over carbon-intensive alternatives. It could also eliminate the currently existing double taxation on stored electricity17 and incentivize electrification as a means to avoid higher taxes on carbon-intensive fuel. Challenges addressed Clean power availability and price Limited financing support Risk aversion for new technologies Expand the Industrial Emissions Directive The current Industrial Emissions Directive,18 which mandates the adoption of Best Available Technologies (BAT) to meet regulatory limits on industrial pollution, could be extended to include a broader range of electrification technologies. This expansion could go beyond the current focus on heat pumps for heat recovery (currently mentioned only for waste incineration19 and food, drink and milk industries20). Challenges addressed Clean power availability and price Limited financing support Risk aversion for new technologies Ensure EU Action Plan for Grids targets industrial electrification Current approaches to energy system development will be increasingly challenged to accommodate the rising load from electrification. The EU’s Grid Action Plan, launched in 2023, could be leveraged to help facilitate industrial electrification alongside the necessary grid expansion and optimization. In implementing this plan, the European Commission should collaborate closely with industry stakeholders to ensure it meets their electrification needs, particularly in long-term grid planning (Action 2), smart and efficient grid innovation (Action 7) and grid tariffs that incentivize electrification (Action 8). Challenges addressed Clean power availability and price Limited financing support Risk aversion for new technologies Regulatory ideas for Europe3 Industrial Electrification: Strategies and Policies for Europe 9

Industrial Electrification 2024