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EU Proposes New Plan To Boost Green Industries

The European Commission is preparing a new law that aims to turn the region into the “home of clean tech and innovation”.

 

The president of the European Commission, Ursula von der Leyen, announced the plans during a speech at the World Economic Forum in Davos, Switzerland.

The plan would provide financial support to the bloc’s green industries through state aid as well as a European Sovereignty Fund. Its goal is to keep the sector competitive in the face of the technological dominance of the US and China.   

In her speech, Von der Leyen said the steps would be part of the European Union’s (EU) Green Deal industrial plan to help Europe reach net-zero carbon emissions by 2050.

“To help make this happen, we will put forward a new ‘Net Zero Industry Act’,” she said. “The aim will be to focus investment on strategic projects along the entire supply chain.

“We will especially look at how to simplify and fast-track permitting for new clean tech production sites.”

The initiative has been interpreted as Europe’s response to the Inflation Reduction Act in the US, which established a $369bn (£302bn) scheme to subsidise green production that could tempt European companies to relocate.

In her speech, the president of the European Commission stated the importance of creating a regulatory environment in the bloc that fosters innovation and counters “relocation risks from foreign subsidies”. 

“To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU,” Von der Leyen said. “This is why we will propose to temporarily adapt our state aid rules to speed up and simplify. Easier calculations. Simpler procedures. Accelerated approvals.”

Some of the examples Von der Leyen discussed were simple tax-break models, as well as targeted aid for production facilities in “strategic” clean-technology value chains.

The European leader specifically named wind, heat pumps, solar, clean hydrogen and energy storage as crucial sectors on the road to net zero.

The need for Europe-wide funding provisions was explained as a way of preventing “fragmentation” and unfair competition resulting from differences in the amount of state aid each nation could provide. 

The fear is not unfounded as 53 per cent of the €672bn (£588bn) of state aid approved by the Commission last year came from Germany, while 24 per cent was provided by France and 7 per cent by Italy.

“For the medium term, we will prepare a European Sovereignty Fund as part of the mid-term review of our budget later this year,” von der Leyen said.

The plan was welcomed by several EU countries which were quick to underline the importance of EU funding to level the playing field.

“It has to be implemented through European mechanisms that ensure equality within the European space,” said Fernando Medina, Portuguese finance minister. “The smaller European countries cannot lose to the larger countries in an internal competition.”

Last year, the EU announced its intention to effectively cut 90 per cent of oil imports from Russia by the end of the year, in protest at Russia’s invasion of Ukraine.

However, the measure has resulted in rising oil and gas prices across the bloc, which have led EU officials to request reductions in nations’ electricity use by as much as 15 per cent and to call for an “emergency intervention” that would reform the bloc’s energy market to curb soaring prices.

Going forwards, the bloc has expressed a desire to ensure economic and energetic independence, being weary of over-relying on technology and rare earth metals from the US and China.

“We have a compelling need to make this net-zero transition without creating new dependencies,” Von der Leyen said.

Over the last few months, the EU and the US have clashed following Washington’s decision to grant tax credits to citizens buying electric cars made in North America, which the EU said discriminates against foreign manufacturers and would break international trade rules. 

Von der Leyen’s green industry fund proposal is expected to be discussed among the EU’s member nations before their 27 leaders meet for a summit in mid-February. 

Source: E&T

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