The European Commission has unveiled a blueprint to help EU industry compete with China and the United States in developing clean technology and securing the raw materials needed to transform its economy to reach its climate goals.
Two centrepieces of the EU’s Green Deal Industrial Plan, the Net-Zero Industry Act and Critical Raw Materials Act, were laid out by the EU executive on Thursday as part of its push to develop green industries in Europe.
The strategy is aimed to counterbalance the advantages given to green industries in the US by the Inflation Reduction Act and avoid a repeat of what EU policymakers view as the mistakes of the past, in which cutting-edge technologies were developed in Europe only for local companies to be eclipsed by competitors in China.
Commission vice-president and climate chief Frans Timmermans said the EU’s lack of an industrial policy and overreliance on market forces in the past had led to Europe slipping behind.
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“The one mistake I think we’ve made ... would be to have no industrial policy, and that’s what we had for too long. Thinking that the market would take care of everything itself,” he told reporters.
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“We now understand that the strategic choices that China made a decade ago are now coming home to roost, and we also have to make our own strategic decisions now for the decades to come.”
The Irish Government has concerns about the EU’s more interventionist policy turn, fearing that subsidies and protectionist trade barriers could lead to inefficiencies and disadvantage Europe’s smaller economies, particularly those most open to free trade like Ireland.
The Net-Zero Industry Act was strongly criticised in an analysis last week by Brussels-based think tank Bruegel, which described the plan as “unabashedly protectionist” and a return to the failed “industrial planning of the 1960s”.
But Mr Timmermans pushed back against this criticism in a press conference to launch the proposal.
“What we’re doing is forward-looking, it’s not old fashioned, it’s what you need to do when you’re in the middle of an industrial revolution,” he said.
It comes after European Commission president Ursula von der Leyen told Members of the European Parliament on Wednesday that “the race is on” to determine “who is going to be dominant” in clean technology in the future.
“We must get our act together if we want to stay front runners,” she said.
If approved by the European Parliament and member states, the Net-Zero Industry Act would set a target for the EU to produce at least 40 per cent of the clean tech products it needs by 2030, with the industry boosted by investment incentives and the streamlining of the permitting process.
The proposal would also simplify state aid schemes and allow subsidies for green technology, including allowing the use of EU funds to offer tax breaks.
The overall aim is to make “the EU the home of clean technologies manufacturing and green jobs”, according to the Commission.
The plan for raw materials is partly a response to the lessons of the Covid-19 pandemic and the energy crisis in terms of critical raw materials, as the the risks of dependence on unreliable overseas suppliers, whether for vaccines or for gas, have been highlighted.
The raw materials plan would set targets for the EU to mine 10 per cent of the raw materials it consumes including cobalt, lithium and rare earth, and boost recycling and processing of components.
The union would seek to strike raw material partnerships and free trade agreements with like-minded allies to create reliable supply chains. Companies within the EU engaged in mining or processing of critical raw materials would also be recognised as strategically important, and benefit from access to funding and streamlined permitting under the plan.
Representing a landmark moment in EU policy, the bills are part of efforts to reach the bloc’s commitment under the Paris Agreement to reduce greenhouse gas emissions by 55 per cent by 2030 and become the first carbon-neutral continent by 2050, in a bid to avoid catastrophic levels of climate change.
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