A competition for good - The EU Green Deal Industrial Plan
Abirbhav Mukherjee
Technology, Strategy and Consulting Professional specialising in Hydrogen | Co-Chair, Leaders 2050
Introduction
The dust barely settled over the historic US Inflation Reduction Act (IRA), 2022 when, close on the heels of that, the European Union contemplated rivaling the same. In her speech on the sidelines of World Economic Forum 2023 in Davos, Dr. Ursula von der Leyen, President of the EU, contemplated the creation of a new net-zero industrial act to help make EU take a leading position in clean-technologies and innovation [1].
It has been opined in several quarters about the possibility of a beef between the EU and USA over the passage of the IRA as the latter might have threatened the exodus of EU Clean Tech industries across the Atlantic. And if those fears did turn true, then the EU would have stared at a loss of manufacturing and innovation opportunities in sunshine industries like clean-tech, which include, but are not limited to, green hydrogen. And the timing could not have been worse, given the back-to-back blows the world has faced in the recent past, from a pandemic to a severe war, and worsened further by the blistering heatwaves caused due to climate change.
However, to some extent, a slight rivalry is needed in this regard, as both the EU and USA and all other countries investing in Clean Tech are set to win together. Innovation and Clean Manufacturing are poised to occur unabated along both the Eastern and Western shores of the Atlantic. And isn't that the very purpose of the prodigious investment for Clean Technologies across the globe? I believe the answer is affirmative.
What the EU wants to achieve?
A. A predictable, coherent and simplified regulatory environment?
The EU wishes to help reduce bottlenecks in the rollout of critical levers to ensure a speedy transition to clean energy. As per my personal research, there do exist bottlenecks or delays with regards to obtaining "permits" for clean infrastructure like offshore wind farms, which can range to several years at a stretch [2]. The emphasis of EU, therefore, on such a critical lever is quite commendable as it not only ensures faster rollout of infrastructure, but also helps in realization of large scale clean tech. manufacturing, sustainable growth and jobs, and energy security.
B. Speeding up access to finance
Access to attractive financing schemes, quickly, is paramount for any sunrise industry, and clean tech is no exception. Through this pillar, the EU wishes to ensure a holistic development of robust green tech supply chain, massive manufacturing and research on clean tech projects. And perhaps this pillar will receive increased spotlight in the coming months, owing to its announcement of US IRA like premium on per kg of green hydrogen produced, for 10 years.
A noteworthy feature of this pillar is the quasi ensemble-cast of the seeming silos of EU clean tech ecosystem, like RED-II, REpowerEU, CMU and InvestEU to name a few. Since the very beginning, EU has aimed towards harmonizing the schemes of not only individual member states, but also those operating at the Union level.
C. Enhancing skills
The EU anticipates a formidable competition in near future for talent in green tech space. Thus, the EU, through its skill development programme, wishes to ensure an inclusive and equitable sharing of knowledge and relevant skills for the clean tech industry, especially among its youth and women to help them contribute to this sunrise industry in EU.
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D. Trade and Resilient Supply Chains
As has been felt across several quarters, a robust and reliable supply chain is of paramount importance to sustain any economy and the net-zero economy is no stranger to this assertion. The EU thus wishes to build global cooperations to ensure the availability of critical components or raw materials needed to sustain the net-zero economy, particularly clean tech manufacturing.
Much of the tenets of the European Green Deal is also tied to the bedrock of manufacturing and opens an opportunity to bring mass manufacturing back to EU, this time for advanced, cleaner technologies.
The EU will strive to ensure transparent trading mechanisms and work with global organizations like WTO to ensure that trade in green tech is supported. The EU will also cooperate with USA and help smoothen the friction due to IRA.
Fairness is perhaps the bedrock of any trade to successfully conclude. Acknowledging the importance of this, the EU will try to monitor and investigate any unfair subsidies provided by any trading country which can skew market economics unfairly. The EU will also ensure the stoppage of IP theft or forced technology transfers to maintain fairness in trade.
While investment is crucial to the development of industries, the hostile ones aimed towards achieving monopoly in strategic sectors do present a matter of concern. The EU aims to develop a framework of screening FDIs to help thwart off such unfair or hostile investments, while ensuring the market attractiveness for genuine FDIs.
Opinion
The EU Green Deal Industrial Plan is no doubt a comprehensive and well-designed plan showcasing its intent. The rivalry between countries, the USA and EU in this case, for promoting clean tech in undoubtedly good as such a rivalry helps generate more funds for the rapid deployment of clean tech across geographies. It will be worthwhile to see which exact technologies, sub-components, innovations, research projects and manufacturing lines end up getting benefited by such a plan.
While we did see the mention of green technologies like biofuels, circular economy, batteries and prominently, green hydrogen, taking the centrestage in this plan, we would also like to draw attention towards several other clean technologies which are equally advantageous, yet, are somehow missing from this discussion. Green investment deals need to be agnostic of technology and let the market determine the success or failure of emerging technologies.
Advanced Nuclear technologies like SMR is conspicuously missing from this deal. It may be noted that this clean tech has enormous potential to decarbonize a wide range of industries, sustainably and safely, and not just be involved in power generation or clean hydrogen production. Unfortunately, some political disagreement at EU level is preventing its deployment in many countries, which is causing the return of coal-led carbon-emissions in EU, for the want of baseload power. Nature Based Solutions (NBS) for advanced and sustainable agriculture, soil carbon capture, biodiversity conservation and clean food processing industry also lacks mention in this plan. NBS is also quite capable of offering sustained and clean economic benefits to stakeholders akin to RE power. A holistic view of all clean technologies is needed and nothing should be spared when it comes to powering a new economy based on the bedrock of science and clean technologies.
This is a great start and in my opinion, will have a lasting, positive impact towards the development of clean technology led industries in not only EU, but also the world at large.
Further Reading:
Disclaimer: Views are personal and are not necessarily those of my employer
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Cover Image Source:
Microsoft Powerpoint