Green Deal Industrial Plan: EU pressed for clarity and swift delivery by Europe’s green economy

 EU policymakers are set to convene later this week for an ‘extraordinary meeting’ on the Plan’s details, after European Commission President Ursula von der Leyen confirmed that it was in the works at Davos last month and subsequently published the basic inclusions last week.

The Plan is the EU’s answer to the US’s Inflation Reduction Act – the world’s largest subsidy package to date for climate-related activities including renewable energy, hydrogen and electric vehicles. The Plan’s pillars are ensuring more rapid access to funding – public and private – for cleantech firms; implementing regulations that enable the net-zero transition; closing skills gaps and cooperating globally on the trade of low-carbon goods and services.

Today (8 January), 40 organisations and individuals are sending a joint letter to EU lawmakers, urging more focus on the specifics of the Plan. Various trade bodies and green groups have already pointed out that the EU’s initial announcements have been vague and argued that the devil is still very much in the detail.

The letter also highlights the importance of maximising the scale of the impact of the Plan and of ensuring that it is delivered in a timely manner, stating that the EU must “avoid complacency” in the face of the energy price crisis and global cleantech race.

Signatories include the Cambridge Institute for Sustainability Leadership and several members of the Institute’s Corporate Leaders Group, such as Signify, Interface, DSM and Iberdrola. Also on the signatory list are think tanks like E3G and I4CE; finance sector bodies such as the Climate Bonds Initiative and Wermuth Asset Management and cleantech entrepreneurs such as 1.5 Ventures and Solytic.

The letter sets out a string of ‘key guiding principles’ for a successful Green Deal Industrial Plan. Chief among them is ensuring that the Plan is properly embedded within existing efforts on climate, innovation, education and employment, thus making it a “top and enduring political priority” that is vital to all of these agendas. It states that the joined-up approach “must reflect the role of innovation as a key ingredient in driving competitive sustainability”.

It then argues the case for a Plan that is properly integrated with the EU’s ‘Fit for 55 Package’ to deliver a 55% reduction in emissions by 2030, plus its RePowerEU plan to end Russian fossil fuel imports by 2027, and any other related policies. The Plan should speed up the low-carbon transition, the letter states, but all policy packages should set out clear short, medium and long-term goals that align.

Also flagged is the importance of the EU and member state Governments walking the talk, requiring green public procurement.

“Businesses committed to net-zero sustainability need stable, long-term strategy, targets and policies and public investment to drive market demand and innovation,” summarised Signify’s global head of sustainability and public affairs Harry Verhaar

Ending delays, unlocking finance

Beyond the top-level focus on the Plan, the letter’s signatories set out several principles and recommendations relating to finance.

They call for a review of state aid procedures, which they argue sometimes delay, rather than enabling, public and private investment in renewables.

They also call for a Bridging Fund and Sovereignty Fund which are correctly targeted to ensure that existing clean technologies scale rapidly to the point of price parity with their fossil fuel predecessors, while also supporting emerging and nascent technologies that are likely to mature in the medium or long term.

The Bridging Fund is set to be backed by €250bn of public funding, mostly re-allocated from existing funding, given that several EU member states oppose any new joint borrowing to fund the Plan. It is a short-term solution that will provide rapid access to funding. In the longer term, a new Sovereignty Fund that is intended to “give a structural answer to investment needs” will be set up. The Fund is expected to support less mature technologies.

The letter calls for a Sovereignty Fund that is “fit for innovation”. It advocates support for projects at varying stages of maturity, to end the culture of one-off funding for one stage in the development process. It also advocates for matched funding, whereby private and public finance can be blended for projects with larger funding needs. A €1bn grant matching scheme for early-stage projects is flagged.

Clarity on the Funds could be provided through a new Climate Investment Plan for 2025 – 2035, the letter floats. It states that such a Plan could set out funding from these sources plus others, providing a more coherent approach. Nations could then be asked to draw up their own National Climate Investment Plans to feed into this.

As well as finance, the letter highlights the importance of solving issues relating to permitting, development and other key barriers. It has been much-reported in recent months that many clean energy projects sit completed yet unconnected to the grid in Europe and beyond due to clunky processes here.

A strong approach to funding, coupled with these other structural changes to policy and processes, should result in an economy where it is easier to build a new low-carbon or zero-carbon facility than a fossil fuel one, the letter warns.

OneFiveVentures’ chief executive Tobias Lechtenfeld said: “We need smarter market-based instruments focused on new climate tech start-ups. This includes price instruments for making green technologies more affordable, demand incentives to stimulate competition, and loan guarantees to make climate tech projects bankable. And we need much more speed in the public sector — for approvals, public grants, and the rollout of new instruments. That would help to counter the Inflation Reduction Act.”

EU lawmakers are set to negotiate the Plan on Thursday and Friday (9-10 February).