Why competitive industry needs cheap power and smart policy

**Pamela Largue** (0:12)
Europe's industrial sector is facing a defining moment. As policymakers work to accelerate the energy transition while strengthening competitiveness, energy-intensive industries are grappling with soaring energy costs, global competition, evolving trade policies, and the realities of decarbonisation.
To unpack these realities in more detail, I had the opportunity to speak with Paul Voss, Director General of European Aluminium. From the future of the EU ETS, to the role of innovation and trade defence, Paul offers a refreshingly candid assessment of what's working, what isn't, and what Europe must do to ensure it can both decarbonise and retain a strong industrial base. I'm Pamela Largue, and this is the Energy Transitions Podcast.
Paul, thank you so much for joining me today to talk about the policies that are helping or hindering European industry, specifically the aluminium sector. And when we were preparing for this podcast, you mentioned that sometimes you use various expletives to express yourself, especially when talking about challenges facing the sector, which I can understand. And clearly, there are some frustrations being felt. Speaking of frustration, perhaps we should start by talking about the EU ETS, the review of which is due. What are your thoughts, expectations or unmet expectations of this mechanism?

**Paul Voss** (1:41)
It's become quite an ideological discussion involving a lot of people who probably don't understand all that well how the ETS works in detail. And I include myself among those people.
There are real ETS experts and then there are people like me. It's different. In Brussels and in European capitals, the world is kind of dividing into ambitious, and I use the word, I mean, I put it in quotes, ambitious people who want an ETS that aggressively phases out free allocations. What's that word? I had laggards. People keep talking about front runners versus laggards.
And, you know, as always with these things, I think in real life, the debate's a bit more complicated than that. You have industries depending on the technological state of things, or the state of the technology in the industry. It's more or less easy to decarbonize. There are clearer pathways and less clear pathways. As for example, I mean, I mean, the big part of our emissions are in direct, it's the electricity. So, okay, the decarbonization of the power grid is well underway. I think the last part will be the hardest part. So, I suspect this journey will take longer than everyone perhaps like it to. But you can kind of see the direction of travel. And for us, I mean, we celebrate this. We encourage investment in renewables and in the grid. And probably, I don't know about new nuclear because it tends to be expensive and very, very slow to build. But certainly, keeping existing nuclear facilities running and get the most we can out of them because that's low carbon power. That's all great. For us on the installation side, the direct emissions, we know that the technologies that will be needed to decarbonize aluminum aren't coming in the short term. We sort of see what they are. There's a lot of work going on, innovation, research, pilot projects. But every time I talk to serious people who understand these things, they all sell me sort of late 2030s if everything goes well.
And so pressure to decarbonize those facilities in the meantime is completely meaningless to us. It's just a, it ends up feeling just like a fine. It's not a question of ambition or will or desire or intention or anything. It's just, it's not going to happen in the next 10 years. We know this.
And it can be frustrating when you're told, oh, you should be more ambitious or you should, you should be more of a front runner. Well, I mean, there are certain technological realities that we have to deal with, and no amount of goodwill can, can overcome that. And so, you know, I would like to see an ETS that is flexible enough to accommodate those realities without abandoning the entire project because I mean, I can, I can see the weather outside just like everybody else. There's no, there's no discussion about whether or not climate change is happening, and I think it would be really weird and irresponsible of us to say there's nothing to be done about it, or it's not our problem. Of course, it is. But I can't, I can't ask my industry to, to do the impossible. And they're all very, very motivated. I mean, fully decarbonized Aluminium for us is the Holy Grail. There's no lack of enthusiasm for getting it.
But the process is what it is. It will take years still. And I suspect more generally that a lot of assumptions, whether it's Aluminium or any other major industrial sector, a lot of the assumptions that have been made about how decarbonization will go are probably going to be, going to turn out to be overly optimistic because all of us have been incentivized for years to make optimistic assumptions about what's going to happen because it was expected politically. So we've all generated these roadmaps and stories about how our decarbonization journey is going to go. And you're not encouraged to take a kind of cautious conservative approach. You're incentivized to be very ambitious. And some might say to kind of suspend disbelief a little bit and just say, oh, well, maybe if all these things go incredibly well, this might happen. And then that goes from being one possible scenario to a forecast. And then we start building policy around those forecasts. And I worry sometimes that the whole thing is built on a lot of optimism. But we'll see.