EU unveils plan for clean technology

Leaders give lukewarm response to strategy aimed at countering U.S. act

The European Commission has unveiled its Green Deal Industrial Plan to enhance its competitiveness in response to the $369 billion Inflation Reduction Act, or IRA, in the United States, but some European leaders say the plan comes too late and will have limited effect.

The plan aims to provide a more supportive environment for scaling up the European Union's manufacturing capacity for the net-zero technologies and products required to meet Europe's ambitious climate targets, the commission 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," the European Commission President Ursula von der Leyen said on Wednesday.

"Europe is determined to lead the clean tech revolution."

The plan is based on four pillars: a predictable and simplified regulatory environment, speeding up access to finance, enhancing skills, and open trade for resilient supply chains.

The plan will be discussed during the EU summit next week. Some member states have expressed concern that loosening state aid as outlined in the plan will trigger a subsidies race within the bloc and undermine fair competition.

The new amendment to state aid rules will last until the end of 2025 and encompass six main areas in the renewable energy sector: batteries, solar panels, wind turbines, heat pumps, electrolyzers to produce hydrogen, carbon capture technology and critical raw materials.

The measures reflect the U.S. IRA, which the EU sees as discriminatory and unfair and some of whose provisions it regards as illegal. EU leaders have tried to extract concessions from the U.S. not to discriminate against EU manufacturers, but progress on this has been slow.

Growing concern

There is growing concern in the EU about the bloc's economic competitiveness. The International Monetary Fund warned in its revised World Economic Outlook on Tuesday that eurozone conditions are problematic, with growth forecast to bottom out at 0.7 percent this year.

The EEP Group, the largest bloc in the European Parliament, said on Wednesday that it welcomes the industrial plan, but regrets that it did not come earlier and that it will have limited effect.

"It is clear that the commission has reached its intellectual and political limits when trying to make European industry competitive again," said an EPP Group spokesman, Christian Ehler, an MEP from Germany.

The challenges the U.S. IRA presents demonstrate that the regulatory approach of the Green Deal of the European Commission Executive Vice-President Frans Timmermans has immense limitations, he said.

The Renew Europe Group, another political group in the European Parliament, said on Wednesday that it welcomes the commission's proposals.

"The EU must respond to the risks that the U.S. Inflation Reduction Act poses to the competitiveness of European businesses and the integrity of Europe's single market," it said.

Stephane Sejourne, president of the Renew Europe Group, said 27 EU national reactions to the IRA would be a recipe for failure.

"We need a truly European solution to secure open strategic autonomy, invest in EU-wide projects and the green tech revolution."

E3G, a climate change think tank with offices in several European cities and the U.S., said the industrial plan is a welcome step toward climate neutrality but falls short of a full clean economy strategy.

"The plan is a needed burst of can-do energy for Europe," said Manon Dufour, head of E3G Brussels office. "The vision of Europe as a leading and competitive clean economy will, however, require a much stronger focus on energy efficiency, sustainable finance and global clean economy cooperation to become reality."

Critics also say turning on the subsidies tap would mostly benefit Germany and France.

"Let's not sacrifice industry in 25 member states so the two richest ones can continue splurging," said Milan Elkerbout, a research fellow and head of the climate policy program at the Centre for European Policy Studies, a think tank in Brussels, adding that the potential impact of the IRA on industries such as electric vehicles was debatable anyway due to existing tax credits and import tariffs.