The context of global warming, and low carbon transition plans, are threatening the future of high energy consuming industrial sectors in the European Union (EU). The need to respond to environmental challenges is demonstrated by support for international level energy policies and legal requirements, such as the Kyoto Protocol which the EU supports, and increased EU-level environmental legislation and energy policies. The effect of these initiatives is gradually transforming industrial activity in the EU.However, since not all the countries involved have adopted these policies, their net effect needs to be assessed taking account of their side-effects, such as delocalization of industrial activity, and the different legal environmental frameworks in the countries where companies have chosen to relocate. This paper analyses EU energy policy and its real impact on a particular energy intensive industry, the European ceramic tile sector. 1 The discussion in this paper is not about the purpose of EU legislation, but about its effects on a specific industry. The effect of policy on industry is not a new topic, but the question of the unwanted effects of environmental and energy policy on European industry is becoming more relevant as the struggle to achieve a post-carbon Europe increases. In focusing on a specific set of EU legislation on a particular industry we add to the debate by showing the negative effects of policy mechanisms. We highlight the need for a scientific evaluation of the systemic changes required for a transition to a resource-efficient, green and competitive low-carbon economy outlined in the 7th Environment Action Programme. We suggest the EU should periodically re-evaluate its Emission Trading Scheme legislation to include specific actions and a follow up system which would prevent the best performing environmental companies from delocalizing or shutting down.