The EU industry is at a crossroads, and will undergo a profound transformation to maintain long-term competitiveness. For Central and Eastern Europe (CEE), the urgency of this transformation is enhanced by the continued economic and strategic importance of heavy industry and the potential to become a hub for clean industrial production. Among a portfolio of tools to support industrial transformation, lead market creation emerges as a key instrument to improve predictability of demand for clean industrial products and solidify the business case for switching to low-carbon industrial production.
Green Public Procurement (GPP) could be a key tool in this sense, making the state and subnational procurement bodies the first big buyers of clean industrial products, particularly steel and cement which are extensively used in public construction and whose low-carbon transformation requires financial support and revenue certainty. With many CEE countries investing heavily in public infrastructure (roads, railways, bridges, and others) and a growing stock of public buildings, GPP could be an essential instrument to trigger the domestic production of clean steel and cement, two of the most emissions-intensive industries, helping to position CEE countries as key suppliers in industrial value chains as well as reduce the footprint of their booming construction sectors.
Following a period of rapid deindustrialisation after 1990, the CEE region currently produces just under one-fifth of the EU’s steel and one-third of its cement. It is an important consumer of these industrial products, contributing nearly one-third of EU consumption in 2023 and one-third to cement consumption. This is accompanied by a rapidly-expanding CEE construction sector, faster-than-average growth in the buildout of transport and utilities infrastructure, and a continued key importance of the automotive industry, a major steel consumer. Certain CEE countries are significant and growing importers of steel and cement: Poland had steel imports equivalent to over two-thirds of its consumption in 2023, while cement imports in Romania saw a nearly 500% increase between 2016 and 2023. This shows potential opportunities for reducing import dependency by enhancing domestic production of steel and cement, particularly once the Carbon Border Adjustment Mechanism provides a level playing field for low-carbon European industry to compete with cheaper, emissions-intensive imports.
To estimate the potential for using GPP to stimulate clean industrial production in CEE, this study provides a first-level estimate of the volume of steel and cement used in public construction in 12 CEE countries (Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Austria, Hungary, Slovenia, Croatia, Romania, and Bulgaria). It uses a tailored methodology and a combination of data sources to estimate the quantities of flat and long steel products and cement purchased by public authorities, calculate the potential emissions reductions enabled by mandating carbon footprint thresholds in public procurement, and estimate the impact on national budgets for public procurement. We estimate total annual steel and cement consumption by public construction in the study countries to be 4.5 million tonnes (Mt) and 15.6 Mt, respectively. This is equivalent to 3.1% and 9.5% of all steel and cement consumption in the EU, respectively. Steel consumption is likely underestimated due to conservative estimates on the amount of steel typically consumed in European construction.
Mandating near-zero emissions thresholds in CEE public construction results in estimated emissions reductions of 9.9 Mt CO2 annually across study countries, or €616 million in EU allowance (EUA) costs at current prices of €62/tonne CO2. The impact of near-zero steel and cement procurement on public budgets is difficult to ascertain, given the substantial uncertainty around the premium of clean steel and cement production. First-level estimates in our study indicate a cost impact ranging from 0.11% (Austria) to 1.35% (Romania) as a share of the total public procurement budget. The accuracy of these estimates will depend on the variations in industrial production costs across countries, driven by input prices (e.g., renewable electricity prices) and revenue support mechanisms for industrial producers (e.g., subsidies).
The potentially sizable market of CEE public construction, to which private construction, vehicle manufacturing, shipbuilding, and other sectors could contribute additionally, indicates a key role for lead market creation mechanisms. To leverage the opportunities for launching a market for clean steel and cement in CEE, EU and national policymakers may want to consider several recommendations:
- Improve monitoring and data collection on public procurement, to allow the tracking of spending on construction materials and eventually compliance with environmental and/or local production criteria.
- Develop clear labels for green steel, cement, and concrete, based on ambitious decarbonisation trajectories and going beyond the existing benchmarks of the EU Emissions Trading System.
- Make GPP an integral part of other support instruments for industrial transformation, recognising the key role of infrastructure development and funding under the Cohesion Policy, as well as the automotive and shipbuilding sectors as sources of steel demand.
- Ensure that institutional capacity is sufficient to implement GPP robustly, guaranteeing sustainability of compliance and monitoring while avoiding disproportionate burdens on industrial producers (particularly SMEs).
- Increase regional cooperation across the CEE region to link supply and demand for clean steel and cement across the region, as well as for essential inputs for low-carbon industrial production such as renewable hydrogen and CO2 transport and storage.
This report has been funded by the Bellona Foundation. The views expressed in the report are the sole responsibility of their authors, and do not necessarily represent Bellona’s position.
Luciana Miu, EPG Head of Clean Economy
Luciana Miu is Head of Clean Economy at Energy Policy Group. She oversees the work of the Clean Economy division, including industrial decarbonisation, building energy efficiency, and climate governance and policy. Luciana also conducts in-depth research and stakeholder engagement primarily in the field of industrial decarbonisation and carbon capture and storage.
Luciana is an expert in industrial decarbonisation and building energy efficiency, with a focus on consumer behavior, systems thinking and policy. She is also trained in renewable energy engineering and a highly skilled communicator with significant experience in stakeholder engagement on sustainability projects. Luciana has extensive experience in data collection and analysis, including conducting nationally representative surveys and statistical analysis and modelling in STATA. She is also well-versed in behavioral frameworks and socio-technical systems approaches to sustainability.
She holds a PhD in energy efficiency from Imperial College London, and an MSc in Sustainable Energy Systems and BSc in Environmental Science from the University of Edinburgh. Her PhD thesis has resulted in 3 publications in peer-reviewed journals, including Energy Policy and Energy Research and Social Science.
Luciana is passionate about youth engagement in the energy transition, and is one of the founders of the European Youth Energy Network, the first network of youth-led, energy-focused organisations in the EU. She is a native speaker of Romanian and English, is fluent in French and has basic knowledge of German and Danish.
Contact: luciana.miu@epg-thinktank.org