02 Feb 2023, 13:30
Julian Wettengel

EU green industry plan an ‘important proposal’ to improve investment conditions – chancellor Scholz

Photo shows European Commission president Ursula von der Leyen at podium when presenting Green Deal Industrial Plan. Source: European Union.
Source: European Union.

German government officials and industry associations have welcomed the EU’s proposal for a “Green Deal Industrial Plan,” intended to enhance the competitiveness of Europe's industry on the path to net-zero greenhouse gas emissions. The European Commission’s plan, which aims to make funding more accessible and improve regulation and permit procedures, is the first step in the EU’s process of formulating a comprehensive response to other regions’ industry subsidies packages, notably as the U.S. Inflation Reduction Act. While funding is set to become a key battleground between richer and poorer EU member states, think tanks and NGOs criticised the plan for failing to sufficiently address questions of how to ensure a just transition, or the decarbonisation of heavy industries like steel or chemicals.

German government politicians and industry representatives have welcomed the European Commission’s proposal for a net-zero industry policy package. The plans – meant to keep Europe’s green industries competitive globally – are seen as a response to other regions’ subsidies packages such as the United States’ 369-billion-dollar Inflation Reduction Act.

German chancellor Olaf Scholz said the Commission made “important proposals, all of which go in the right direction.” Scholz made the comments at an event during which U.S. chipmaker Wolfspeed announced its investment decision for a large-scale chip plant in the western German state of Saarland.

For me, the debate on the U.S. Inflation Reduction Act is also an incentive for us Europeans to keep checking how we can further improve the conditions for investment here at home.

German chancellor Olaf Scholz

“For me, the debate on the U.S. Inflation Reduction Act is also an incentive for us Europeans to keep checking how we can further improve the conditions for investment here at home,” the chancellor added. “This includes making European state aid law even more agile and flexible over time so that investors know at an early stage what support they can expect.”

The European Commission presented its ‘Green Deal Industrial Plan for the Net-Zero Age yesterday (1 February) – a package of policy proposals meant to make sure that Europe stays competitive in the transition to climate neutrality.  

At the regulatory level, the Commission aims to stipulate goals for net-zero industrial capacity, and make it easier and faster for clean tech companies to get permits within an upcoming Net-Zero Industry Act. In addition, it aims to make access to funding easier, for example by temporarily relaxing state aid rules and using existing EU funding schemes to finance clean tech. In the medium term, it aims to propose a new European Sovereignty Fund for such investments.

EU plan ‘recognises role of industry in the transformation to climate neutrality’ – industry

The German minister for the economy, Robert Habeck (Green Party), said the Commission tabled “a very good proposal”, which would form the basis of upcoming discussions among EU countries. “Above all, we need faster procedures and better opportunities to promote the green technologies of the future,” he added. Germany would ‘contribute constructively’ as its goal is to strengthen the competitiveness of the industrial location that the country and continent provide. “This can only be achieved in a united and strong Europe,” Habeck said. The minister has been pushing for a response to the U.S. Inflation Reduction Act for some time. Together with the French government, Germany made its  first proposals last year.

German industry welcomed the package. “The Green Deal Industrial Plan rightly recognises the central role of industry in the transformation to climate neutrality,” said Tanja Gönner, managing director of industry association BDI. She criticised the “highly complex conditions for planning and permit procedures”, which she thought have acted as key hurdles to investment. Access to funding has also been an issue, she said. “The EU state aid framework must become more flexible and access to funding programmes less bureaucratic,” she added.

Kerstin Andreae, who heads the energy industry association BDEW, said Europe needs an ‘investment turbocharger’ for clean technologies. It was therefore the right thing to do to answer the U.S. Inflation Reduction Act with a European industry strategy, she continued. “Without entering into a subsidy outbidding race, we must ensure that a similar amount of capital is available in Germany and Europe to manage the massive transformation toward climate neutrality. One thing is clear: we can only invest our way out of this crisis,” she said.

EU leaders will debate the package at a meeting on 9-10 February. After that, the Commission is set to present more detailed proposals, like the Net-Zero Industry Act, in March. Any legislative packages will then undergo the regular process, which entails months-long negotiations in-and-between the Parliament and the Council of member state governments.

Funding is set to be one of the most contentious issues in the debate, as richer countries would benefit from looser state aid rules and be better positioned to support their companies, while poorer states are interested in more and new EU-funding.

“Loosening state aid rules would only favour the few EU countries that already have the budgetary and technological means to respond on their own — France, Germany and the Netherlands,” wrote former member of the European Parliament (MEP) Luis Garicano and Guy Verhofstadt (MEP) in an op-ed in Politico. Instead, the EU should put more effort into “completing the single market”, changing competition rules and transforming the bloc’s coronavirus recovery plan NextGenerationEU into a permanent instrument to supply funds to EU-wide projects for the green transition.

More reactions:

Energy industry association BDEW

In the past, bureaucratic state aid procedures had stood in the way of important energy transition projects, said Kerstin Andreae, head of the BDEW, who welcomed the proposed changes to simplify the process. “Even more important, however, is the creation of a regulatory framework that unleashes investment in clean technologies instead of stifling it.” For example, the European Commission should quickly decide on a “not-too-restrictive” definition of renewable hydrogen to do away with uncertainties for companies willing to invest and thus help the ramp up of a hydrogen economy, said Andreae.


Renewables association BEE

Germany’s renewables association BEE said the EU plan contains good ideas, but had to be implemented swiftly. “We expect that in the course of implementation, clear specifications and measures for greenhouse gas reduction, strengthening of market access and financial opportunities for the production of green technologies will be established,” said BEE head Simone Peter. She called for new funding: “It will quickly become necessary to bring in fresh money for European projects and not just reallocate existing funds.”


Think tank E3G

The Commission’s plan is a step in the right direction but falls short of a full clean economy strategy,  the think tank E3G stated in a press release. “Ramping up production of EU homegrown cleantech is great news,” said the organisation’s Michele Rimini. However, producing more batteries or solar panels was just one side of the equation. “Europe must keep its eye on the ball and insist on decarbonising heavy industries like steel and chemicals,” she said.


NGO CAN Europe

NGO Climate Action Network criticised the proposal for its failure to address the issue of a just transition. “The social dimension is reduced to ensuring the workforce is skilled to match the needs of the economy and there is no attention to inequalities – including in access to clean technologies and digitalization,” said CAN Europe director Chiara Martinelli. “We need to increase the competitiveness of clean economy businesses by immediately phasing out fossil fuel subsidies, including free allocation of pollution certificates under the Emission Trading System. We also need a transformation plan for each heavy-industry site with a reduction pathway for raw materials and energy consumption by 2030,” she added.


NGO alliance European Environmental Bureau (EEB)

The environmental NGO umbrella organisation EEB said the Commission’s proposal is not a much-needed comprehensive plan to clean industry, but rather just an aid scheme for the sector. “While the proposal lays the foundation for a much-needed boost to the green industry in Europe, it raises concerns among environmental groups due to the unclear definition of ‘net-zero’ technology, the deregulatory temptation and the unfair nature of subsidies,” the organisation wrote.

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