Investing in Climate? That’s more like it

We are all witnessing how the global economy is going through profound changes. Companies, value chains and whole markets are slowly adjusting to a carbon-neutral and digitalised world. And in turn these changes are also bringing with them distinct shifts in global politics.

The European Union claims to be a flagbearer on climate diplomacy. It wants to show the way, as it were, and encourage the others to follow suit. No one doubts the urgency of the climate but not everyone is eager to bear the brunt. Neither should Europe. ?

It is not enough for us, Europeans, to go through the digital and green transitions. Our aim should be to emerge from them stronger.

What this means, is that the European industry must be in a position to capture the new emerging markets and at the same time strengthen their position in existing markets. It means that carbon emissions do not leak from the European economy, together with jobs. It means that the European industry ought to be in a position to create carbon-neutral jobs in Europe.

Europe may well want to lead morally and globally on climate, but the bottom-line is that we also need jobs, as all other continents across the globe. To protect our jobs and to create new ones, there is no other way but to be competitive on the global stage and be in a position to supply the world with carbon-neutral and new digital technologies.

The European Union is mulling over a number of new rules to regulate the green and digital transitions. However, regulating is not enough. The much-publicised EU Green Deal was presented to us, by the European Commission, as an economic growth strategy. In reality, the Green Deal is not enough unless the European Union and national governments seriously support the European industry.

Churning out regulations, upon regulations, by the EU, will not sufficiently equip Europe for the next decades. We clearly need an investment plan that supports the industry. It is true that EU Commissioner Breton published an industry policy to proactively support European industry in the two transitions. He also promised a European Chips Act comparable to that of the US. These are both steps in the right direction, but are they enough?

Will the European Chips Act bring to bear the investment firepower of the American Chips Act? While the US is pouring huge sums of money into the two transitions, Europe seems to be lost on the small and fragmented picture of regulations. For while the EU is asking our industry to jump through hoops, the US is investing hugely and directly in its industry.?

Last summer, the US Senate proposed to invest $250bn in the next 5 years under the US Innovation and Competition Act. This includes $120bn for the Endless Frontier Act, which invests in science and research. The Build Back Better Act, even if it gets watered down in Congress, it will be an unprecedented investment towards developing green and digital solutions. No matter how good our EU new rules like the Digital Markets Act, Digital Services Act and Fit For 55 Package end up being, our regulation cannot compete with such investments.

The EU is in a symbolic battle for moral leadership but it needs to recognise that it also finds itself facing stiff competition from the US and China. To tackle this mammoth challenge, the EU has to go beyond its habitual approach of dealing with issues, in silos, of different Council configurations and Parliamentary Committees and other permutations and at the same time desperately hanging on to rigid separations of competences.

The European Union needs to flank its regulatory prowess with serious investments in European technologies. Above all, this investment needs to be based on solid plans that meet the needs of our industry.

If climate measures are purely decided by those with a mandate to protect the environment; if the industrial policy is only set by those with a mandate to support industry; if investments are decided by those whose mandate is to minimise the national contributions to the European Union budget; we will all fail in our ultimate mission to provide our children with a sustainable and prosperous future. It would be failure of historic proportions.

We need to invest in the industry every single year from now on. Plainly speaking, the latest efforts of the European national governments to downsize the annual European Union budget are misguided.

We cannot afford to cut €300 million in research and innovation spending and €100 million in strategic digital and energy investments. Why are we creating more regulatory burdens for our industry at one table and cut crucial investments at another table?

We will not regulate ourselves into the future. That is not how it works.

If we want a future, we need to invest in it because if we don’t, others will snatch it away from us. Realistically, that is how it works.??