31 Oct 2023, 13:50
Julian Wettengel

Germany must not waste time in global race to host industrial production of the future – econ min

Clean Energy Wire

Germany must act quickly to secure its place as a key location for industries in an increasingly climate-friendly global economy, said economy minister Robert Habeck. “Almost all major economic areas are trying to take up the race to host the industrial production of the future,” Habeck said at a press conference ahead of a conference organised by his ministry. The Green politician recalled the example of the U.S., which had introduced the inflation reduction act (IRA) to support its industries. “This means that we can no longer afford to hesitate or waste time,” he added. The minister last week presented his strategy to strengthen the country as an industrial location also in the future, with controversial temporary electricity price subsidies as a key element. Habeck said that while he was clearly committed to ensuring Germany could continue to be an attractive location for industry, there were also economists who said that energy intensive industries should not receive subsidies and would eventually have to stop producing in the country. “That is a different strategic answer,” which would continue to be discussed, he said, cautioning that this could lead to more dependencies on other countries.

At the industry conference, Wally Adeyemo, U.S. deputy treasury secretary, said that a “common misperception” regarding the IRA was that it signalled “a turn towards American protectionism or the start of a subsidies race to the bottom.” This is not the intention of the U.S. government, he said, and emphasised that cooperation is necessary. “It is impossible for us to meet our climate and energy security goals without working with Europe and without a strong European industrial base with Germany at its core,” said Adeyemo. Even as the U.S. spurred domestic production, it recognised the need to build resilient supply chains with allies and partners.

When the idea of an industry power price was first introduced, it was welcomed by industry as "a clear game changer," but it remains controversial among economists and policymakers. Both chancellor Olaf Scholz and finance minister Christian Lindner (FDP) have repeatedly rejected it. Habeck could not say when the decision about the subsidies would be taken, adding there was a “50:50” chance that they would be introduced. At the conference, Siegfried Russwurm, head of industry association BDI, reiterated his support for the subsidies, but also called for other measures, such as making planning and permitting easier. He cautioned the government: “It's about setting the framework, not micro-regulation.”

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