Wednesday, March 29, 2023

Europe is legislating at a rapid pace to boost the competitiveness of its green industry

Seven months after the adoption of the American climate law and the shock wave that followed it in Europe, Brussels is pulling out the heavy legislative artillery to allow its green industry to remain competitive. The time is serious: it is a question of answering the massive American subsidies in the direction of their national manufacturers of “clean” technologies – nearly 500 billion dollars over ten years. But also to those of China, pre-existing.

The EU fears that they will attract European companies en masse and, ultimately, that they will deindustrialize the Old Continent. Volkswagen has, for example, already given in to the sirens by investing $2 billion in an electric vehicle factory in South Carolina.

“We need to develop our industrial base of clean technologies, to create jobs, in Europe, and to ensure access to the clean solutions which we urgently need”, declared Ursula von der Leyen, the president of the Commission before the European Parliament.

State aid floodgates

The Commission intends to achieve this with two laws unveiled on Thursday, one for “a net zero emissions industry” and the other on critical raw materials. This is not about “duplicating” US law (the IRA), but rather about creating a better “environment” to boost the manufacturing of clean technologies.

By financing them better and more, hence the recent relaxation of the rules relating to State aid. And above all, by simplifying the tedious regulatory procedures under which European companies are crumbling, while easy access to financing is one of the strengths of the IRA.

“No more naivety, now it’s action!” exclaimed Thierry Breton, Commissioner for the Internal Market, pilot of the two texts. There is no European Green Deal without secure and sustainable access to raw materials, without a solid manufacturing base in Europe along the clean technology value chain. »

Drafted in record time, these laws provide that by 2030, the EU will produce at least 40% of its key clean technologies such as batteries, wind turbines, electrolyzers, biomethane… Alas, for France, the he nuclear energy is not on the list of priority technologies eligible for the law, which is limited to the technologies of tomorrow. Only advanced nuclear technologies such as small modular reactors will be able to benefit from the measures, but to a different degree.

Dependence on raw materials

The text on raw materials aims to secure EU supplies of critical minerals such as lithium, cobalt for electric batteries and silicon for solar panels.

The energy crisis linked to Russia’s war in Ukraine has shown this: without a local supply of fossil fuels, Europe is weakened. Today, she fears that China, in quasi-monopoly on rare earths or magnesium, exerts the same type of pressure against her…

The text thus enhances the ambitions of the EU in terms of extraction, refining, recycling and diversification. By 2030, the EU wants to boost its processing capacity to cover 40% of its annual consumption. It intends to extract on its territory 10% of its consumption of strategic raw materials (compared to 3% today) and not to depend on a single third country for more than 65% of its imports for each of the strategic raw materials.

“Our resources are not sufficient to meet our needs, we must rely on international partnerships”, explained Valdis Dombrovskis, Commissioner for Trade, mentioning various types of existing agreements with New Zealand, Chile, Canada, Namibia… and others to come with Australia, Norway and Argentina.

Europe’s mistake

No financing is attached to these laws, but Brussels has decided to throw open the floodgates of State aid until 2025, to mobilize European funds not yet used and to set up, this summer, a sovereign fund on which the Twenty-Seven are however for the time being shared. In total, the EU needs 450 billion per year for its “decarbonisation”.

All of these measures aim to put the Old Continent back in pole position in the now global race for clean technologies. The Twenty-Seven want to regain their ascendancy in some of the industries lost to China, such as solar power. And position yourself well in the new, fast-growing markets for heat pumps and other electrolyzers.

“Our mistake is that we had no industrial policy, recognized Frans Timmermans, Vice-President of the European Commission, in charge of the European Green Pact. We thought the market would take care of itself. But the choices made by China ten years ago are paying off today. It is now up to us to make our decisions for the decade to come. »

The texts can still be modified by the European Parliament and Council. Pascal Canfin, chairman of the Environment Committee, has already shown his support. “The race for the localization of the production of the industrial goods necessary to achieve our climate objectives is launched at high speed. This is good news,” he posted on his LinkedIn account. The speed of the European co-legislators to reach an agreement will be decisive for the industrial future of the EU.


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