Green Deal Industrial Plan: EU readies measures to rival US’s cleantech subsidy package

The proposals were unveiled in full today (1 February), after Commission President Ursula von der Leyen first confirmed publicly that they were in the works at the World Economic Forum’s annual meeting in Davos last month.

Speaking in Davos, von der Leyen said she wished to implement interventions to  “make Europe the home of cleantech and industrial innovation on the road to net-zero”. She said: “The next decades will see the greatest industrial transformation of our times – maybe of any times. And those who develop and manufacture the technology that will be the foundation of tomorrow’s economy will have the greatest competitive edge. The scale of the opportunity is clear for all to see.”

There is a specific need, von der Leyen explained, for the EU to ensure that the US’s Inflation Reduction Act, which details $369bn of subsidies for climate action does not undercut its competitiveness on the global stage when it comes to products related to renewable energy, zero-emission transport and low-emission industry.

The Plan unveiled today has four pillars, one of them being more rapid access to funding for cleantech firms. The Commission has proposed a new bridging solution of around €250bn – the majority of which will be drawn from existing funds that will be repurposed. This includes funding already committed under the RePowerEU plan to end Russian fossil fuel imports this decade, as well as the Innovation Fund, Recovery and Resilience Facility and InvestEU.

Beyond the bridging solution, the Commission is proposing a new Sovereignty Fund that is intended to “give a structural answer to investment needs”. More information about the Fund’s scale and scope will be revealed before summer. This Fund is expected to support emerging technologies to the point of commercial maturity, as the EU strives to deliver cleantech price parity this decade.

It bears noting that, within the past week, seven EU member states wrote to the Commission to oppose any new joint EU borrowing to fund the Plan. The letter was signed by the Czech Republic, Denmark, Finland, Austria, Ireland, Estonia and Slovakia. Similar sentiment had already been expressed by Germany, the Netherlands and Belgium.

Regulation, skills, supply

Beyond simply scaling government spending and attempting to leverage greater private investment, the Plan covers implementing regulations that enable the net-zero transition; closing skills gaps and cooperating globally on the trade of low-carbon goods and services.

The Commission is drawing up, the Plan confirms, a Net-Zero Industry Act. The Act will bring forth changes to legislation, regulation and planning to speed up the development of strategic projects such as renewable energy generation arrays, energy storage arrays and low-carbon industrial hubs. It will include measures through to 2030, including specific goals for scaling certain kinds of clean technology.

New standards will also be drawn up for key products and technologies.

On skills, the Plan proposes the creation of a network of Net-Zero Industry Academies. The Commission would work with member states to identify the appropriate locations for these academies and the industries they should serve. These Academies should deliver upskilling and reskilling to help those at all stages of their careers.

As well as creating the Academies, the Commission will explore ways to unlock more blended (public-private) finance for skills development. It will also look into ways to encourage non-EU nationals to move to the bloc if they have skills in priority sectors.

The fourth and final pillar of the plan relates to ‘open trade for resilient supply chains’. This had been the sticking point between the EU and the US on the Inflation Reduction Act.

In a statement announcing the Plan, the Commission stated: “[We] will protect the Single Market from unfair trade in the clean tech sector and will use its instruments to ensure that foreign subsidies do not distort competition in the Single Market, also in the clean-tech sector.”

The statement confirms the creation of a ‘Critical Raw Materials Club’, bringing together exporting and importing nations to ensure a “competitive and diversified” supply chain for the critical minerals needed to produce clean technologies. This feeds into the ‘Critical Raw Materials Act’ first announced in September 2022. The Act proposes targets to increase the bloc’s self-sufficiency of key materials where possible.

For each of the 18 critical minerals, the top three producer countries collectively control a minimum of 73% of production. China is the biggest producer of 12 of the 18 minerals. Nations are keen to avoid leaning into these non-diverse supply chains, which are not resilient to disruption.

Summarising the new Plan, von der Leyen said: “We have a once-in-a-generation opportunity to show the way with speed, ambition and a sense of purpose to secure the EU’s industrial lead in the fast-growing net-zero technology sector.

“Europe is determined to lead the clean tech revolution. For our companies and people, it means turning skills into quality jobs and innovation into mass production, thanks to a simpler and faster framework. Better access to finance will allow our key clean tech industries to scale up quickly.”

Responding to the Plan, the Cambridge Institute for Sustainability Leadership (CISL) Brussels’ executive chair Martin Porter said it “could mark a tipping point” in the net-zero transition on a global basis.

He elaborated: “It is a sign that winning the net-zero race to the top with the Green Deal as its compass is the way forward for the EU. There is everything to play for and a clear urgency for the EU to up its game, to avoid complacency or reverting to outdated notions of competitiveness in its actions. The Plan must now deliver on its promise of greater speed, scale and focus on funding and investment for innovation.”