Designing decarbonisation pathways for heavy industry in Central and Eastern Europe

EU Member States are confronted with a pressing dual imperative: the urgent need to decarbonise their economies while preserving industrial competitiveness. Traditional heavy industries – such as refining, steel, cement, and chemicals – rely on emissions-intensive processes to produce many essential products embedded deeply into modern European society. These processes are challenging to decarbonise at scale, which necessitates a suite of clean energy technologies, including carbon capture and storage (CCS) and clean hydrogen, to chart a credible path toward profound industrial decarbonisation in Europe.  

This is particularly salient for Central and Eastern European (CEE) countries, where industries provide a considerably higher share of employment and gross value added (GVA) than the EU average. Here, decarbonisation is not only an environmental priority but also a socio-economic requisite to ensure a just and cost-competitive transition to a climate-neutral Europe. Achieving this will require both national strategies across CEE countries a collective regional strategy to harness synergies, enhance efficiency, and develop shared solutions.  

Meaningful progress and regional collaboration have so far been limited, falling short of unlocking the full potential of the region’s industrial base, but convenings like the H2Poland conference are beginning to address this gap by gathering key stakeholders to chart a path forward. 

Exploring technology pathways for industrial decarbonisation at H2Poland 

H2Poland, a conference held annually in Poznań, is one of CEE’s premier events focused on the advancement and deployment of hydrogen technologies and its role in wider decarbonisation efforts. Bringing together key stakeholders from across the region and beyond, it offers a vital platform for knowledge exchange and deliberation on the challenges and opportunities of building a clean hydrogen ecosystem. 

Outside the halls of this year’s event, Clean Air Task Force hosted a high-level roundtable to examine how designing and implementing technology optionality approaches can guide the CEE region’s heavy industry onto a deep decarbonisation trajectory. Participants included policymakers, industry, academia and civil society experts.  

The discussion explored key opportunities for clean hydrogen and carbon capture and storage in the region with initial interventions providing a foundation for a robust exchange of ideas. Key takeaways and analysis from the event are summarized below.  

Priority actions for clean hydrogen and carbon capture and storage in the coming years 

Building on the roundtable discussion, participants identified four priority actions that policymakers and industry leaders in Central and Eastern Europe should pursue to accelerate industrial decarbonisation while maintaining economic competitiveness: 

1. Policy design: EU and CEE policymakers must design policies that support the decarbonisation of existing heavy industry in the most cost competitive way. Updating or implementing new policies should include a streamlined regulatory framework, clear targets and milestones grounded in sound analysis based on industrial needs, coupled with an approach for establishing business models that drives industry investment in carbon capture and storage and clean hydrogen. 
2. Targeted deployment: CEE countries should focus first on prioritising efforts and support around industrial clusters in the region with the highest hydrogen offtake and/or carbon capture and storage potential. 
3. Shared financial risk:  Governments should establish sustainable funding schemes to share risks and distribute capital among multiple stakeholders, ensuring that cost burdens do not fall solely on a single company. 
4. Cross-border collaboration: CEE countries should actively cooperate within the region with international partners on carbon capture and clean hydrogen initiatives through cross-border infrastructure development, joint research and development efforts and the exchange of best practices. 

These priority actions rest on two focus areas: clean hydrogen and carbon capture and storage, which present both significant opportunities and implementation challenges for the region, which we explore next. 

The role of clean hydrogen in industrial decarbonisation 

Current consumption and challenges 

Hydrogen is often highlighted as a crucial decarbonisation pathway for energy-intensive industries, but it is also part of the existing decarbonisation problem as unabated hydrogen is already produced and consumed in large quantities. Recent CATF analysis found that in 2023, total hydrogen consumption across the EU reached 7.3 million tonnes per year, with approximately 99.7% of this demand met by unabated fossil fuel-based hydrogen. Only 0.3% of hydrogen use across the EU is derived from clean, low-carbon sources. 

While a small amount of this hydrogen (both unabated and clean) is consumed for small-scale pilot projects in sectors not customarily consuming hydrogen – such as mobility, power and natural gas pipeline blending – most consumption is concentrated in a handful of large-scale industrial applications: refining, ammonia and fertiliser, and specialised chemicals production.  

The CEE region accounts for almost a quarter of EU hydrogen consumption, at 1.6 million tonnes per year. Poland – the third largest consumer across the entire EU27 – is the largest consumer in CEE by a wide margin, accounting for 45% of regional demand. Second and third largest are Hungary (12%) and Slovakia (10%), respectively. 90% of CEE hydrogen demand comes from just two sectors: refining and ammonia production. 

CEE hydrogen consumption per country (kt/y) in 2023

Refining

Refining represents nearly half of all hydrogen consumption in CEE, mostly through dedicated, on-site hydrogen production units. Given that many refineries in the region are a mix of size and scale, some older or smaller-scale facilities may risk a loss in competitiveness as carbon costs rise and demand for conventional transportation fuels decreases, in large part due to the shifting political drive toward electrified and other low-carbon mobility solutions. Some refiners aim to pivot to cleaner product streams, such as producing sustainable aviation fuels, however the decision to convert all refinery units to decarbonised portfolios and operations will depend on techno-economic feasibility. 

Ammonia 

Ammonia production accounts for approximately 42% of hydrogen demand in CEE, split among 15 hydrogen-producing plants in the region. Notably, Poland has the largest ammonia production capacity not only in CEE, but also in the entire EU, followed by Lithuania and Slovakia as the second and third largest CEE producers respectively. Ammonia serves as a linchpin for developing nitrogen-based fertilisers (such as urea and nitric acid) and is also a precursor to a wide array of essential chemicals that make, for example, nylon, plastics, foams, and rubbers, and more – products that are deeply embedded into numerous societal products and functions.  

Ammonia production in Poland currently hovers around 60% capacity, with any shortfalls met by imports. High operational and carbon compliance costs put domestic producers at risk when seeking to utilise cleaner hydrogen for production processes, especially in the face of increasing competition against cheaper (non-decarbonised) imports from outside of the EU.  

Roundtable participants noted that small profit margins in the ammonia sector limit how far individual investments in their own decarbonisation can go and without some level of external intervention, producers foresee increased costs being passed down to consumers (i.e., farmers) that could have larger societal cost impacts, or risk of being priced out of the EU market in the face of cheaper imports. This underscores the need for policy mechanisms, aligned with EU regulations, that support the deployment of clean hydrogen in hard-to-abate sectors whilst keeping these sectors economically active and competitive in the EU market. 

Carbon capture and storage in CEE industrial transformation 

Financing 

Public intervention is crucial to ensure that the CO₂ transport and storage infrastructure rollout aligns with the EU’s decarbonisation goals and the effects of rising EU ETS prices. The development of carbon capture and storage projects can typically take up to ten years from initial planning to operation. Without early support, the necessary infrastructure will not be available on time for emitters that need to capture and store their CO₂.  A possible solution involves using Carbon Contracts for Difference (CCfDs) combined with state guarantees and EU funding to support climate infrastructure investments. 
 
Adequate regulatory framework in Poland and cross regional cooperation 

Despite the substantial geological potential for carbon storage in Poland and a pressing industrial need, the country faces significant regulatory hurdles that are slowing its deployment. Existing legal frameworks have yet to address onshore CO₂ storage comprehensively, nor do they offer robust support mechanisms that would incentivise early adopters. Participants called for “smart regulation” highlighting the need to avoid excessive regulatory burdens that could discourage industrial investment in carbon capture technologies. They emphasised that a fundamental part of any carbon capture policy should be a strategy for carbon capture developed in collaboration with industry. Such a strategy would guide the development and implementation of current and future legal and regulatory frameworks for carbon capture projects, in alignment with EU regulations and international standards.  

Carbon capture and storage projects will likely require cross-border cooperation, as EU Member States vary significantly in terms of their access to geological storage sites, and the availability of pipeline and transport infrastructure. Participants called for CEE countries to engage in a more robust cross-regional collaboration fora to better plan and coordinate cross-border infrastructure. 

Average transport and storage costs for Polish emitters

Poland’s CO2 storage potential 

Participants discussed the storage potential for CO2 in CEE, remarking that it is indeed much cheaper to store CO2 domestically rather than export it to other countries. However, progress is currently halted by the fact that given regulations for domestic storage development are yet to be created. That leaves near-term export to more advanced storage sites as the only option for frontrunner capture projects in the region. Ultimately, domestic storage sites will take time to assess, characterise and develop, but time is in short supply. 

Going forward 

The roundtable demonstrated that affordable carbon capture and storage and clean hydrogen are essential for meeting ambitious climate goals and safeguarding industrial competitiveness. Through policy planning and adoption of the best practices for carbon capture and hydrogen regulations, financing models, and infrastructure development, CEE countries can continue their decarbonisation efforts while ensuring competitiveness and economic growth. With these steps, CEE has a potential to emerge as a decarbonisation frontrunner, provided that new legislation, financial tools, and infrastructure are implemented in a timely and efficient manner.