EU launches subsidy plan to protect its green industry

The Green Deal Industrial Plan, unveiled by the European Commission, will be a package of loosened regulations, funding mechanisms, upskilling measures and efforts to balance subsidies for net zero investments with partner countries on a global scale.

The race to cut net greenhouse emissions to zero is a matter of prestige for the European Union but also an opportunity to develop its green industry into a global economic powerhouse. As a response to the United States Inflation Reduction Act and subsidies that other rival countries are pouring into the sector, the European Commission presented its Green Deal Industrial Plan.

Rising subsidies in other markets could make the EU less competitive, draw investments away or even motivate companies to move elsewhere. European Commission President Ursula von der Leyen particularly pointed to incentives that the United States, Japan, India, Canada and the United Kingdom are offering. On the other hand, she said the EU supports such packages in the context of the fight against climate change.

The plan aims to provide a more supportive environment for the scaling up of the EU’s manufacturing capacity for net zero technologies and products required to meet Europe’s ambitious climate targets. It complements previous initiatives such as the European Green Deal and REPowerEU, according to the commissioners. The latter was rolled out last year to rapidly reduce the dependence on Russian fossil fuels.

Von der Leyen: Europe is determined to lead clean tech revolution

The new framework is envisaged to enable a predictable and simplified regulatory environment, speed up access to finance, enhance skills and open trade for resilient supply chains.

The proposition is primarily for supporting energy technologies such as wind and solar power

“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,” Von der Leyen said. The upcoming Critical Raw Materials Act, which concerns strategic commodities like rare earths, will also be part of the overall efforts, according to the commission.

The Green Deal Industrial Plan proposition is primarily for energy technologies such as wind and solar power, heat pumps, battery storage, electric mobility and green hydrogen, together with carbon capture and storage.

More responsibility for public funding to member states

Member states need a simpler mechanism for granting aid for the green transition, the announcement adds. The idea is to consult governments on a temporary framework for such public funding.

The fourth pillar is about global cooperation and making trade work for the green transition under the principles of fair competition and open trade, building on the engagements with the EU’s partners and the work of the World Trade Organization, the 27-member bloc’s executive body explained.

Some national governments oppose further joint borrowing

The European Commission is yet to secure a critical mass for its new subsidy and administrative streamlining push. A group of countries led by Germany are opposed to further borrowing on an EU level. As for Von der Leyen, she suggested that some of the cost can be covered from REPowerEU, InvestEU and the Innovation Fund, even though the three packages were approved earlier and with similar goals.

But the head of the European Commission highlighted the fact that imports of Russian fossil fuels are declining much faster than expected and claimed EUR 250 billion could be redirected to net zero efforts.