Europe’s industrial policy should focus in emissions trading, fewer subsidies – German gov’t advisors
Clean Energy Wire / Tagesspiegel Background
Germany and Europe’s approach to industrial policy should focus on deregulation while fully backing emissions trading, instead of green subsidies, said German government advisors in a report. Support measures and objectives of Europe’s industrial policy risked ending up in a “hodgepodge of subsidies”, the scientific advisory board of Germany’s economy ministry wrote in a press release, warning that companies might base decisions on political support rather than market opportunities.
The advisors said that industrial policy interventions were justified if important political goals could not be achieved through market measures. In the case of climate protection, the European Emissions Trading System (ETS), for example, established a market-based system covering a large share of the EU’s emissions, they wrote. The board made the case that industrial policy interventions for climate protection purposes should therefore be examined “to determine the extent to which they are necessary and appropriate”. They added that subsidies should be awarded on a competitive basis, and that green lead markets, which create demand for climate-neutral products, are preferable.
Philipp Jäger, industry expert at the Jacques Delors Centre in Berlin, cautioned against this approach, telling Tagesspiegel Background that the advisory board had “lost sight of the political realities”. He stressed that if CO2 prices rise too sharply, the EU ETS would not survive politically.
The recommendations come amid a downturn in German industry that is accelerating, according to a new report by EY. The sector has lost nearly 250,000 jobs since 2019 and revenue has continued to decline this year, the consultancy found. Moreover, Germany faces a decline in manufacturing activity, a weakening labour market, and relatively higher energy prices as a result of Russia’s war in Ukraine, as well as a troubled car sector.
With its Clean Industrial Deal, Europe is working to transform its industry to climate friendly production while ensuring it remains competitive on the global stage.
