Economic perspectives in the EU “net-zero-growth” are clear enough: new markets are on the doorstep with breakthrough clean technologies, which will also transform the whole energy systems. Active investors will secure a place in the new economy’s paradigm by rejuvenating industrial manufacturing bases and creating newly skilled workforce. The EU also intends to hold leading positions in the world by supporting other countries in decarbonising their economies.
At the end of 2019, the EU presented the European “green deal” with the ultimate goal of making the European continent the first in the world climate-neutral region by 2050. The plan was supplemented by the EU-wide climate legislation to provide a detailed regulation framework regarding the EU’s commitment to climate neutrality and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030 (compared to 1990 levels).
In the transition to a net-zero economy, Europe’s competitiveness will strongly rely on its capacity to develop and manufacture the clean technologies that make this transition possible.
The European green deal’s industrial plan was publicly presented at the World Economic Forum in Davos in January 2023 as the EU initiative “to sharpen continental competitive edge through clean-tech investment” and continue holding leading positions in the world on the paths to climate neutrality. Through this approach, the EU will mobilise all available national and the EU tools to improve framework conditions for investment, with a view of ensuring EU’s resilience and competitiveness.
During last decades, the EU has created industrial strategy with strong foundations for the policy that support the ambitious twin transitions to a green and digital economy, aimed at making the industrial sectors in the states more competitive globally, while enhancing the EU-wide strategic autonomy.
To enable the new industrial goals to be greening and competitive, as well as stimulate public and private investments in the transformation of numerous national economy sectors, the Commission has elaborated a clear policy framework (supplemented by adequate regulations, such as the Battery and/or the Eco-design for Sustainable Products Regulations). The latter has already activated industrial alliances in the field of batteries, raw materials, solar, hydrogen and circular plastics to promote industrial cooperation.
In addition, different EU funding sources such as the Recovery and Resilience Facility, the Innovation Fund, InvestEU and cohesion policy are striving to mobilise public and private financial resources to support the “green-type investments”.
Against the backdrop of high energy prices and rapidly changing geopolitical situation, the EU member states have to speed up the “net-zero” industrial transformation. The new “green deal industrial plan” will ensure that the EU states have necessary access to the technologies, products and solutions that are key to “green transition” and represent a major new source of economic growth and quality jobs. Besides, the plan will strengthen the competitiveness of European industrial sectors, as well as attract investments in the net-zero industrial bases and in the green industrial innovation.
More in: https://ec.europa.eu/commission/presscorner/detail/en/QANDA_23_511
The scale of the opportunity for European industry puts this need in sharp focus. The International Energy Agency in the “Energy Technology Perspectives -2023” estimates that the global market for key mass-manufactured clean energy technologies will be worth around € 600 billion a year by 2030, i.e. more than three times today’s level. The related energy manufacturing jobs could more than double in the same time period. The net-zero industry globally is growing strongly; quite often the extent of demand is outpacing supply.
EU’s clean-industrial strategy
In March 2020, the Commission revealed the continental industrial strategy that would support the twin transition to a green and digital economy, make European industrial sector more competitive globally and enhance regional strategic autonomy.
The EU industrial strategy is in progress; presently the process focuses on what more needs to be done and what lessons need to be learned.
For example, the SMEs – as a primary vehicle of innovation in the industrial systems – will acquire particular attention in the new strategy. This is reflected in a horizontal manner by increased attention to regulatory burdens for SMEs. New actions will strongly benefit SMEs and start-ups, e.g. through a strengthened Single Market (the Single Market includes 14 industrial sectors in the member states), reduced supply dependencies and the accelerated green and digital transitions.
Note: EU’s 14 industrial systems include: aerospace and defence, agro-food, construction, cultural and creative industries, digital, electronics, energy intensive industries, energy-renewables, health, mobility/transport/automotive, proximity, social economy and civil security, retail, textile and tourism.
There are 6 strategic areas where the EU has dependencies of foreign supplies, e.g. in raw materials, and in batteries, in active pharmaceutical ingredients, in components for hydrogen and in semiconductors, as well as in cloud and edge technologies.
As to the EU’s strategic dependence, the situation is the following: – from a total of 5200 products analysed, there are 137 products in sensitive ecosystems for which the EU is highly dependent on foreign suppliers; – these products represent 6% of the value of all imported products in Europe; – over half of these dependencies originate in China, followed by Vietnam and Brazil (16 % together); – 34 products are more vulnerable, with low potential for diversification and substitution with EU production (they include various raw materials and chemicals used in energy-intensive industries and health); – most sensitive imported products, however, represent 0.6% of the value of all imported products in Europe.
The new strategy also includes some measures dedicated to SMEs such as on increased resilience, combating late payments, and supporting solvency.
More in: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/european-industrial-strategy_en
Main plan’s components
There are already a number of EU programs and initiatives aimed in different ways at supporting the deployment of clean technologies, e.g. deployment of renewable energies and related infrastructures and national grids, development of hydrogen facilities and other energy-supplying networks. Thus, the “green industrial deal” will complement these efforts by focusing on the net-zero manufacturing capacities, alongside the development of necessary green skills in the member states’ workforce to facilitate the transformation. Besides, the “green industrial deal” will, in general, create optimal conditions for net-zero industries to thrive in the EU-27 and without compromising European social market economy.
A feasible regulatory system for the “green industrial deal” is based on four main pillars:
= The first pillar is about a simpler regulatory framework; the Commission is drafting a Net-Zero Industry Act to identify goals for net-zero industrial capacity and provide a regulatory framework suited for its quick deployment, which includes, e.g. simplified and fast-track permitting, promotion of European strategic projects and developing supporting system to scale-up clean technologies in the member states. This legal framework will be complemented by the Critical Raw Materials Act, to ensure sufficient access to necessary resources (like rare earth materials vital for manufacturing key technologies) and reforming existing electricity market structures in the states to make consumers benefit from the lower costs of renewables.
Besides, the “industrial alliances” would present an appropriate tool in order to accelerate cooperative industrial activities, e.g. to attract private investors to take part in new business partnerships and models in an open, transparent and competitive manner with due account of additional qualified job creation. Such alliances would pay particular attention to inclusiveness for start-ups and SMEs. The Commission is preparing to launch alliances in the following sectors: in processors and semiconductor technologies, Alliance for Industrial Data, for edge and cloud systems; it is considering the preparation of other alliances, e.g. on Space Launchers and an Alliance on Zero Emission Aviation.
= The second pillar is to speed up investment and financing for clean-technology’s production: i.e. public financing, in conjunction with further progress on the European Capital Markets Union, can unlock huge amounts of private financing required for the green transition. Under competition policy, the Commission aims to guarantee a level playing field within the Single Market while making it easier for the EU states to grant necessary aid to quick implementation of industrial green transition. In order to speed up and simplify aid granting, the Commission will amend Temporary State aid Crisis and Transition Framework and revise the General Block Exemption Regulation in light of the “green deal”, increasing notification’s thresholds for support of “green investments”.
The Commission will also facilitate the use of existing EU funds for financing clean-tech innovation, manufacturing and deployment. The Commission is also exploring avenues to achieve greater common financing at EU-wide level to support investments in manufacturing of net-zero technologies; thus, the Commission and the member states will focus on REPowerEU, InvestEU and the Innovation Fund, in order to find common solutions for fast and targeted support. In the mid-term, the Commission intends to address investment needs in several industrial sectors, by proposing a European Sovereignty Fund in the context of the review of the Multi-annual financial framework in summer 2023.
To help the EU states getting access the REPowerEU funds, the Commission adopts in February 2023 new guidance on recovery and resilience plans, explaining the process of modifying existing plans and the modalities for preparing revised REPowerEU chapters.
= The third pillar is about enhancing skills: it is known that between 35% and 40% of all jobs could be affected by the green transition; thus developing the skills needed for new-quality jobs will be a priority for the European Year of Skills-2023. To develop the skills for a people involved in industrial green transition, the Commission will propose to establish so-called “Net-Zero Industry Academies” to roll out up-skilling and re-skilling programs in strategic industries. It will also consider how to combine a “skills-first-approach”, recognising actual skills, with existing approaches based on qualifications; it will look into facilitating access of third country nationals to the EU’s labour markets in priority sectors, as well as measures to foster and align public and private funding for skills development.
= The fourth pillar is about “open trade for resilient supply chains”; it is to orient “green industrial transformation” towards global cooperation and making trade work for the green transition, under the principles of fair competition and open trade, with due respect of the engagements with the EU’s partners and the work of the World Trade Organization. The Commission will continue to develop the EU’s network of Free Trade Agreements and other forms of global cooperation with partners to support the green transition. It will also explore the creation of a Critical Raw Materials Club, to bring together raw material “consumers” and resource-rich countries to ensure global security of supply through a competitive and diversified industrial base, and of the Clean Tech/Net-Zero Industrial Partnerships.
At the same time, the Commission will also protect the EU single market from unfair trade in the clean-tech sector and will use power to ensure that foreign subsidies do not distort competition in the single market’s clean-tech sector.
Main reference document: = A Green Deal Industrial Plan for the Net-Zero Age, Commission’s Communication, adopted 1February 2023, COM (2023) 62 final to the European Parliament, the European Council, the Council of Ministers, the Economic and Social Committee and Committee of the Regions.
More in the following Commission’s weblinks: = A Green Deal Industrial Plan for the Net-Zero Age; = State aid: Proposal for a Temporary Crisis and Transition Framework; = Questions & Answers; = Factsheet; = A European Green Deal; = European industrial strategy; = Guidance on REPowerEU chapters in the context of recovery and resilience plans.