Speaking at the World Economic Forum in Davos on Tuesday 17 January, the President of the European Commission, Ursula von der Leyen, put forward the idea of setting up a ‘Net-Zero Industry Act’ at EU level. This is one of the four elements of a European response to third-country initiatives to support productive investment in the climate transition, first and foremost of which is the US Inflation Reduction Act.
“We need to create a regulatory environment that allows us to scale up fast and to create conducive conditions for sectors crucial to reaching net zero” greenhouse gas emissions, she said, citing “wind, heat pumps, solar, clean hydrogen, storage”.
The new ‘Net-Zero Industry Act’, which will build on the ‘Chips Act’ (see EUROPE 13057/8), will identify clear targets along the supply chain for relevant strategic industry sectors by 2030. This will include simplifying and speeding up the issuing of permits for the construction of new production sites, especially for IPCEI projects.
The ‘Critical Raw Materials Act’, which the Commission is expected to unveil in the first quarter (see EUROPE 13098/1), will contribute to the development of low-carbon technologies by helping EU countries to access strategic resources such as lithium, while limiting dependence on producing countries, and to establish recycling channels for rare metals in the EU.
The second pillar of the European response mentioned by Ms von der Leyen is to preserve the attractiveness of the EU by granting public financial aid on a par with the incentives put in place by competing third countries. The EU framework for State aid will be further temporarily relaxed and simplified, including tax credits (see EUROPE 13100/3).
“But State aid will only be a limited solution that only a few Member States will be able to use”, Ms von der Leyen noted, a semi-veiled reference to Germany and France, which account for the lion’s share of approved State aid.
The Commission President put the idea of a “European sovereign wealth fund” back on the table, to be further explored during this year’s mid-term review of the 2021-2027 Multiannual Financial Framework, expected in 2023. Since such an initiative will take time to materialise, she mentioned an ongoing assessment within her services of the extent of the financial needs, which, according to Ms von der Leyen, may require a “bridging solution” to be put in place.
Training for workers in ‘green’ industries is the third pillar of the European response, according to the former German minister, who announced initiatives as part of the European Year of Skills 2023 (see EUROPE 13098/14).
Finally, the Commission will promote an “ambitious” trade agenda aimed at opening up new markets with important partners for the EU, notably Latin America.
Nevertheless, Ms von der Leyen stressed the importance of having a level playing field at international level. She criticised “China” for trying to attract European companies by promising them “cheap energy, low labour costs and a more lenient regulatory environment”, while at the same time heavily subsidising Chinese industry and restricting market access for European companies. Hence the importance, in her view, of using the trade defence instruments that the EU has recently adopted.
Following the Ecofin Council, during which the European response to the IRA was discussed, Commission Executive Vice-President Valdis Dombrovskis, who met with his US counterpart Katherine Tai in Brussels on Tuesday, said that the EU institution’s proposals would be presented on Wednesday “1 February”. On behalf of the Swedish Presidency of the EU Council, Elisabeth Svantesson spoke of an “intense” discussion in which different opinions were expressed.
Also in Davos, Belgian Prime Minister Alexander de Croo stressed that the best response to the temptation for European companies to relocate is to create its own system. “It shouldn’t be copying the IRA. We should play on our own advantages. If we look at the technological side, hydrogen, offshore wind and so on Europe is leading in these domains compared to the US because we invested in them much earlier. So we should come up with our schemes which are more tailored to what our strengths are and are actually complementary to what the US are doing”, he explained.
As for the relaxation of State aid rules, he warned against “a race of the deepest pockets”. (Original version in French by Mathieu Bion with Léa Marchal)