The European Commission is gradually clarifying its intentions regarding the ‘Industrial Accelerator Act’ (IAA) and the concept of “European preference”, which it is due to propose on 25 February.
While a number of Member States, including Germany, Italy and Belgium, as well as Sweden and the Netherlands, have called on the Commission not to annoy the EU’s trading partners or increase the regulatory burden, the Commission is expected to incorporate minimum European ‘content’ requirements into the allocation of public funds, but by including third countries, “trusted partners” that would have reciprocal international commitments, such as the Government Procurement Agreement, and would contribute “to the Union’s competitiveness, resilience and economic security”, according to a latest draft text consulted by Agence Europe.
The Commission will be responsible for examining whether these third countries meet these conditions.
“To avoid the risk of de-industrialisation, loss of competitiveness and strategic autonomy, plant closure, and related social unrest, low-carbon demand-side measures should be combined with EU origin requirements to adequately support the transition of such industries”, writes the Commission.
In the case of steel, the proposal addressing the negative trade-related effects of global overcapacity in the trade in steel within the EU already provides for such a guarantee, making additional EU origin requirements unnecessary.
In this context, targeted demand-side measures can help create lead markets for low-carbon and energy-intensive industrial products produced in the EU, thereby supporting decarbonisation while strengthening the EU’s industrial base.
This new IAA regulation also includes a chapter on foreign direct investment in strategic emerging sectors. It applies to foreign investors owned or controlled by a third country national or an undertaking of a third country, where that third country holds more than 40% of the global manufacturing capacity in the sectors concerned.
It applies to investments exceeding the value of €100 million and through which the investor would acquire or establish control of a Union target or a Union asset, and concerns the following emerging strategic sectors: a) battery technologies and their value chain for battery energy storage systems; b) electric vehicles, plug-in hybrid electric vehicles and fuel-cell electric vehicles, including components related to electrification and digitalisation; c) solar photovoltaic technologies; d) extraction, processing and recycling of critical raw materials.
In addition, the proposal includes a targeted measure to promote European and low-carbon preference for part of certain plastics used in the construction sector.
The regulation will enter into force in 2027 and will remain applicable beyond 2030, with a review every five years to assess the progress made and its alignment with the Union’s climate and economic security objectives, the text also states.
This latest version could meet the expectations of countries that have raised concerns about relations with the EU’s trading partners, but for France it could prove too broad, as Paris wishes to limit itself to countries in the European Economic Area or close partners.
In the meantime, the cabinet of Stéphane Séjourné, the Commission’s Executive Vice-President for Prosperity and Industrial Strategy, has published a note denouncing the shortcuts and disinformation about the Commission’s intentions. “The European market will remain open”. “This preference will be targeted in three ways: (i) on a limited number of critical components, (ii) in a limited number of strategic sectors, (iii) only when public funding is involved”. And “companies producing in Europe will be considered as European, and reciprocal commitments will be made to our trusted partners, who themselves already apply the same rules - in the interests of our value chains”.
Link to the draft: https://aeur.eu/f/kph (Original version in French by Solenn Paulic with Pauline Denys)