Global warming combined with low carbon transition plans is threatening the future of high energy consumption industry 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 activities in the EU. However, since not all countries have adopted these policies, evaluation of their net effect needs to take account also of side-effects such as delocalization of industry activity and the legal environmental frameworks in the countries where companies have chosen to relocate. This paper analyses EU energy policy and its impact on a particular energy intensive industry, the European ceramic tile sector. 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 focussing on a specific set of EU legislation on a particular industry this article adds to the debate by showing the negative effects of policy mechanisms. 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 is highlighted. It is suggested that the EU should periodically re-evaluate its Emissions 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.