EU planning ‘Net-Zero Industry Act’ under updated industrial plan, von der Leyen confirms

Image: European Commission

She announced that the ‘Green Deal Industrial Plan’ is in development at her speech to the World Economic Forum’s (WEF) annual summit in Davos on Tuesday (17 January).

After recapping almost a year of Russia’s war in Ukraine, von der Leyen dedicated her speech to an intention to “make Europe the home of cleantech and industrial innovation on the road to net-zero”. She confirmed that the new Plan will cover changes to regulation, financing the transition, ensuring appropriate skills and promoting the trade of cleantech and low-carbon industrial products within and beyond EU member states.

“The net-zero transformation is already causing huge industrial, economic and geopolitical shifts – by far the quickest and the most pronounced in our lifetime,” von der Leyen stated. “It is changing the nature of work and the shape of our industry. But we are on the brink of something far greater.”

She added: “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.”

von der Leyen went on to outline how many other national markets in the Global North are bringing forward new plans to unlock increased public and private finance for cleantech and sustainable industrial activity, including Japan, Canada, the UK and the US. This is welcome for global climate efforts but the EU is keen to ensure it remains competitive on the global stage.

The president’s chief focus in the speech was on the US. Last year, the US introduced the biggest single package of spending on low-carbon technologies and activities by any national government – the Inflation Reduction Act (IRA). Although the package on offer was significantly scaled back from president Joe Biden’s initial proposal of $555bn, the Senate finally reached an agreement to allocate $369bn to climate action in August 2022. It is hoped that the changes resulting from the Act will enable the US to reduce its annual domestic emissions by at least 40% by 2030, against a 2005 baseline.

Under the IRA, sectors set to receive a funding boost include existing wind and solar technologies; next-gen renewable energy technologies like floating wind and green hydrogen; electric vehicles; alternative aviation and shipping fuels and low-carbon technologies for ports. There is also funding for upskilling and reskilling workers and making infrastructure more climate-resilient in places frequently affected by extreme weather.

The EU has, for the past few months, been very vocal in airing concerns about whether the IRA will hamper its ability to sell technologies such as electric vehicles internationally, and whether US-made imports will undercut EU-made technologies in the bloc. The US published guidelines on EV trade last month, allaying these worries to some extent.

von der Leyen said “it is no secret that certain elements of the design of the IRA raised a number of concerns in terms of some of the targeted incentives for companies”. She spoke of “aggressive attempts to attract our industrial capacities away” to markets like the US or China.

But she emphasised the importance of US-EU collaboration to deliver incentive programmes that are “fair and mutually reinforcing”. There is a wish for there to be a race to the top rather than a race to the bottom.

Net-Zero Industry Act

von der Leyen hinted that the Green Deal Industrial Plan will include the EU’s own answer to the IRA – a new ‘Net-Zero Industry Act’. The Act will run through to 2030, providing “clear goals” for certain kinds of technologies plus new state aid to deliver these goals.

She confirmed the development of a ‘European Sovereignty Fund’, to be announced at the next annual Budget. This will allocate funding in the medium term, with a focus on emerging technologies.

There may also be, she stated, a “bridging solution to provide fast and targeted support where it is most needed”. A needs assessment for this is in the works now to determine which technologies and which national markets should be supported.

Additionally, there will be a reform of state aid within and beyond the Fund, including “easier calculations, simpler procedures” and “accelerated approvals”, for example “with simple tax-break models”, von der Leyen explained. In addition, the EU will also consider loosening state aid requirements for  Important Projects of Common European Interest (IPCEI) focused on cleantech.

The Cambridge Institute for Sustainability Leadership’s executive chair Martin Porter called the announcement “a watershed moment for the EU, but also for all those present in Davos and beyond”.

More than 2,000 people are registered for the Davos summit, but some world leaders are skipping out this year, citing the need to respond to the cost-of-living crisis in their own nations. Olaf Scholz of Germany is the only G7 leader on the ground, for example.

Porter added: “It is a testament to the successful trigger the EU has provided since 2015 to other countries to engage in the ‘race to the top’ in the transition to a climate-neutral economy and a clear sign that this has now reached a positive tipping point… it is absolutely right that the Commission is seeking to enhance the success of its strategy of competitive sustainability by addressing the immediate need for greater scale, focus and speed in its policies towards cleantech industrial innovation and investment.”

Porter cautioned the EU against acting alone and argued the benefits of collaboration with the bloc’s “closest partners” on common value chains.