The European Union has officially set out its emergency plan of action to boost the continent’s global competitiveness in clean technologies, today touting a flurry of new measures to boost green industrial investment, skills, and critical raw material supply chains in support of the bloc’s net zero goals.
With the global race for net zero investment rapidly intensifying in the wake of the Biden administration’s Inflation Reduction Act (IRA), the 21-page EU Green Deal Industrial Plan published today calls for a new Net Zero Industry Act, among other legislative measures, to provide more support for the scaling up of Europe’s green technology manufacturing capacity.
In addition, it recommends a host of fresh measures to accelerate the roll out of clean technologies, including state aid reforms, streamlined planning regulations, enhanced funding, and global clean tech partnerships with like-minded countries to boost trade in green products and materials.
The plan fleshes out proposals first announced by Commission President Ursula von der Leyen in Davos last month, and urges MEPs and EU countries to rapidly transform the draft plan into concrete measures that can strengthen Europe’s competitiveness in fast expanding clean tech industries.
“The Green Deal Industrial Plan aims to simplify, accelerate and align incentives to preserve the competitiveness and attractiveness of the EU as an investment location for the net zero industry,” it states. “Together, the EU and its Member States can send a strong signal to business, while also accelerating the twin transitions.”
The plan – dubbed ‘A Green Deal Industrial Plan for the Net Zero Age’ – sets out a host of policies and initiatives trailed by von der Leyen last month that aim to provide the green economy with support on four fronts: a predictable and simplified regulatory environment, accelerated access to finance, an enhanced skills base, and open trade that can deliver resilient supply chains.
It is widely regarded as a response to the IRA which passed last year and promises to unlock hundreds of billions of dollars of investment in the US green economy through a host of subsidies and policy interventions. The passage of the bill was welcomed by climate campaigners, but it has also stoked fears among the US’s economic competitors that they could lose out in the race to attract global green investment. As such, it has prompted accusations that the White House is engaging in ‘green protectionism’.
The EU’s new plan stresses that European green industries require increased support in response to “unfair competition” from overseas. “In the short term, and especially facing unfair competition against the background of high energy prices, temporary and targeted additional measures are warranted to support European industry,” the plan states. “The regulatory environment has to be adapted for a new reality. It should be simpler and faster to better serve the objectives of the EU towards a sustainable net zero economy and society.”
As trailed last month, the plan calls for a Net Zero Industry Act backed by new industrial capacity goals for 2030 and streamlined permitting processes in order to fast track the development of essential green infrastructure.
The reforms would be backed by a Critical Raw Materials Act aimed at strengthening Europe’s supply chain for rare earth minerals and other clean tech commodities, in order to reduce reliance on non-EU countries such as China.
The EU Commission also wants to establish ‘Critical Raw Materials Clubs’, net zero partnerships and green free trade agreements with like-minded third countries to support both its own and global decarbonisation efforts, according to the plan.
Within the EU, meanwhile, it calls for a step-up in EU clean tech funding, initially through tweaks to existing funding programs in order to unlock short-term bridge funding of around €250bn, but eventually through a new European Sovereignty Fund the Commission hopes to establish before summer 2023.
In order to drive up further green investment, it proposes a suite of reforms to electricity market design and state aid to enable more generous national support programs for clean technology developments, which would be supported by new Net Zero Skills Academies across Europe to prepare the workforce for growing clean tech industry demands.
Announcing the plan today, von der Leyen, said the EU had “a once in a generation opportunity to show the way with speed, ambition and a sense of purpose to secure the EU’s industrial lead in the fast-growing net-zero technology sector” .
“Europe is determined to lead the clean tech revolution,” she said. “For our companies and people, it means turning skills into quality jobs and innovation into mass production, thanks to a simpler and faster framework. Better access to finance will allow our key clean tech industries to scale up quickly.”
European green business figures welcomed the announcement as a sign of the rapidly escalating race to attract investment to support the net zero transition. Martin Porter, executive chair at the Cambridge Institute for Sustainability Leadership (CISL) Brussels, said the proposals “could mark a tipping point in the transition to a climate-neutral economy, not just in Europe but globally”.
“It is a sign that winning the net zero race to the top with the Green Deal as its compass is the way forward for the EU,” he said. “There is everything to play for and a clear urgency for the EU to up its game, to avoid complacency or reverting to outdated notions of competitiveness in its actions. The GDIP must now deliver on its promise of greater speed, scale and focus on funding and investment for innovation.”
Environmental groups, however, gave the announcement more of a cautious welcome, emphasizing the need to ensure the eventual policy package does not rely too heavily on subsidies and offsets, and that there are robust rules and standards to ensure investment supports genuinely green technologies and infrastructure and enables a socially just transition.
Marco Musso, policy officer for fiscal reform at the European Environment Bureau, also warned against the EU Green Deal Industry Plan opening the door for a major deregulation drive that he argued could end up doing more harm than good, while failing to encourage business investment.
“Regulation provides a much greater competitive advantage for the EU than handing out subsidies,” he said. “The EU Green Deal Industry proposal overlooks the key role that the regulatory framework plays in orienting businesses’ investment decisions. Facilitating the uptake of green tech should not be taken as an excuse for vast deregulation. Access to public funding can be eased while ensuring rigorous environmental standards – there is no reason to pitch one against the other.”
The proposals reforms are likely to be widely welcomed by renewable energy groups, however, after trade body WindEurope this week warned investment in wind energy in Europe actually fell in 2022, even as global renewable energy investment soared.
According to the group, orders for new wind turbines were down 47 percent on 2021 as a combination of market reforms, soaring inflation, and restrictive planning and grid connection regimes hampered new project development.
“Last year’s market interventions have made Europe less attractive for renewables investors than the US, Australia, and elsewhere,” said WindEurope CEO Giles Dickson. “They impacted the business case for renewable energy projects across Europe. The figures for wind turbine orders in 2022 should ring an alarm bell: Europe’s energy and climate targets are at risk if the EU fails to ensure an attractive investment environment for renewables.”
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