EU announces own green industry plan in global subsidy race

European Commission President Ursula von der Leyen presented the Green Deal Industrial Plan on Wednesday (1 February) in an effort by the EU to keep up with a worldwide race in subsidy schemes for green industries.

As the EU aims for climate neutrality by 2050, key industries such as the manufacturing of wind turbines, solar panels, and battery-electric vehicles must be ready to supply the necessary technologies to decarbonise the economy.

“We know that in the fight against climate change, most important is the net-zero industry,” von der Leyen said when presenting the plan.

Countries around the world are therefore boosting subsidy schemes for green industries, von der Leyen said, mentioning Japan, India, the UK, Canada, and the US Inflation Reduction Act. 

“Let me be very clear on this one: We welcome this. This is good news,” von der Leyen said. “We have, since long, argued that the fight against climate change is a must.”

However, concerns have been raised that foreign subsidy schemes could encourage green industries to relocate production to other countries or build new factories outside Europe.

Against that backdrop, the Commission adopted a “Green Deal Industrial Plan” to ensure that the production capacity of key technologies in Europe will be increased.

“We know that in the next years, the shape of the net-zero economy and where it is located will be decided, and we want to be an important part of this net-zero industry that we need globally,” she added.

“Net-Zero Industry Act” to be proposed mid-march

To increase the European manufacturing capacity of green technologies, the Commission will propose a new “Net Zero Industry Act” by mid-March.

This, von der Leyen said, “will set targets for what we need until 2030 because there’s a simple equation: Only what gets measured gets done”.

The new law will “focus on the key technologies for the shift to net-zero”, the Commission chief said, adding it will “speed up permitting”, “incentivise multi-country projects”, and help with “cutting red tape”.

Industries that will be within the scope of the new law include “batteries, windmills, heat pumps, solar, electrolysers, carbon capture and storage technologies”, the document reads.

The plan published on Wednesday will be discussed at the meeting of EU heads of state and governments in Brussels on 9-10 February, and von der Leyen said it will “shape the legal proposal” for the Net-Zero Industry Act.

Funding: state aid as a bridge, sovereignty fund later

On funding, which has been a key conflict in the run-up to today’s meeting, von der Leyen stressed different options that are on the table.

“We want to leverage the possibilities provided by REPowerEU, InvestEU and the Innovation Fund,” von der Leyen said. 

While REPowerEU was proposed to get rid of fossil fuel imports from Russia, this “went much faster than we expected”, she added.

“So we have the possibility to redirect or reorient the additional funding of REPowerEU, it’s about €250 billion, to our net-zero industries”, she said, adding that the Commission will “enable and encourage” EU countries to use this money for tax breaks.

“This mirrors then, the speed, the predictability and the targeted way forward as we see from competitors,” she said.

However, although von der Leyen called it “additional funding,” the REPowerEU funding was already decided on much earlier and was not originally thought of as a response to the US Inflation Reduction Act.

For now, the EU’s industrial policy funding is expected to come primarily from member states. That is why state aid rules that normally restrict national subsidies should be relaxed under a temporary framework, according to the Commission president.

The EU executive will start a consultation for this framework on Wednesday, von der Leyen announced, explaining that time-limited state aid is “a bridging solution” and urging member states to “please invest it now”. 

Meanwhile, a so-called “European Sovereignty Fund”, which will be discussed alongside the revision of the EU’s multiannual budget this summer, would then provide a “structural answer”, von der Leyen said, providing “common European funding for common key technologies”, also including quantum computing, artificial intelligence, and biotechnology.

Asked if this would entail joint borrowing – a major red line for Germany – von der Leyen said that “of course, we have to speak with member states about other financing techniques”.

“This discussion will go along with the summer and I cannot give you a precise timeline now.”

[Edited by János Allenbach-Ammann/ Alice Taylor]