Digitalising Industry – Decarbonising the Economy

Digitalising Industry – Decarbonising the Economy

Implications for Prosperity, Labour, Sustainability and Security

The process of marrying information and communication technologies (ICT) with classical manufacturing is frequently dubbed the „4th industrial revolution“. It will have far reaching consequences for industrial processes and management structures. This goes beyond ICT, as new technological developments such as 3D-printers will allow new modes of decentralised, collaborative production processes on a much smaller scale. The emerging concept of “smart factories” is therefore related to “smart grids”, i.e. the idea of digitalising the electricity grid, with both being part of a larger trend known as the “internet of things”.

The manufacturing industry and other sectors are therefore facing similar challenges as the energy sector: a transition from centralised to decentralised modes of production and consumption. In Germany, the big players in the energy sector were not prepared for the energy transition (Energiewende) with its massive drive for renewable energy and the decentralised production of energy. Utilities are now struggling to reinvent themselves for a transformed energy market.

Similarly, if European businesses want to benefit from the digitalisation of industrial processes and if they want to leverage its full potential they need to adapt in a skilful and swift manner. This adaptation applies both to the decentralisation of production processes and to the decentralisation of innovation. The decentralisation of innovation leads to self-organised networks of innovators which cut across corporate boundaries. It also challenges traditional views on intellectual property in the industrial sector.

The emerging Industriewende – as an analogy to the German Energiewende – provides a window of opportunity for Europe: the drive towards smaller, decentralised industrial processes could significantly leverage the intended sustainable re-industrialisation of Europe as it is set out in the Europe 2020 strategy. An innovative mix of policy instruments focusing on lead markets and flagship projects could not only get Europe ahead of the curve – we also have the unique opportunity to combine European re-industrialisation with the EU’s new energy and climate policies for 2030. A reliable legal and regulatory environment for 2030 will inspire the confidence of investors that ultimately brings about innovation. Thus, a future Industriewende promises to make Europe the most resource and energy efficient market in the world securing a competitive edge for decades to come. New, “smart” products and production processes can simultaneously support the re-industrialisation of Europe and bolster the decarbonisation of European industry.

In order to make the Industriewende happen the following research questions have to be addressed:

  • Economic: Currently, the industrial sector contributes a share of about 15% of the EU’s GDP. Linking ICT and the manufacturing industry has the potential to bring the EU closer to the 20% target outlined in the Europe 2020 strategy. Which industrial policies including research – such as Joint Technology Initiatives (JTIs) – can leverage the trend towards digitalisation and bring about immediate growth and sustainable long term prosperity in for Europe?
  • Social: Decentralisation and the increased flexibility of industrial processes including all resources and production factors will have consequences for the quality and quantity of labour. Which labour and social policies must be designed and implemented to turn challenges into opportunities, create new and sustainable jobs, and tackle unemployment, in particular in Southern Europe?
  • Environmental: The horizontal and vertical integration of production processes via ICT is an opportunity to significantly increase resource and energy efficiency and thereby facilitate and accelerate the transition to a low-carbon economy. How exactly can this potential be realised to support the EU’s ambition in its climate and energy policies and to reduce our dependency on fossil fuel and resource imports?
  • Security: The security risks emerging from increased digitalisation were brought home by examples such as the Stuxnet virus that attacked European-made software which in Iran. How can vulnerability be minimised and security concerns, economic benefits and the protection of privacy be adequately balanced?

The private sector is pushing strongly towards the digitalisation of industrial processes, and governments have picked up on this trend. The platform “Industrie 4.0” in Germany provides ample evidence for this. With its Europe 2020 strategy, the EU has already laid the foundations for a sustainable industrial revolution – the Industriewende. If the opportunities of the Industriewende are seized several challenges can be addressed simultaneously: it could bring economic growth, employment opportunities, and environmental benefits. The Industriewende can thereby help overcome both the economic crisis and an emerging climate crisis.

Written in collaboration with IASSAchim Maas and Ina Richter


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