At the World Economic Forum in Davos, the President of the European Commission Ursula von der Leyen stressed out the bloc’s need to boost its cleantech industry and increase its competitiveness against the US and China — amid rising trade tensions with both countries.
The International Energy Agency (IEA) estimates that the market for mass-produced clean energy technology will be worth about $650 billion a year by 2030 – three times more than today. And according to von der Leyen, the intended net-zero transformation is already causing huge industrial, economic and geopolitical shifts, leaving the EU with a slim window of opportunity to invest and gain leadership in the industry.
The recently announced Green Deal Industrial Plan (GDIP) aims to make Europe “the cradle of clean technology”. To achieve this, it focuses on four main areas: regulation, financing, skills and trade.
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The first pillar creates a regulatory framework that simplifies and accelerates access to finance and permits, with a focus on critical net-zero sectors such as wind, solar and clean hydrogen. To support this, a new Net-Zero Industry Act will set clear targets for European clean technology by 2030. Essentially, it will focus on investments in strategic projects across the entire supply chain.
“Until now, the EU taxonomy has shortcomings that hinder the inclusion and growth of innovative players”, Dr. Andreas Sichert – CEO of the German cleantech company Orcan energy – told TNW in response to the GDIP. “We need to leverage the small window to foster innovation and clean technology and ensure they can be scaled up quickly by creating a fertile regulatory environment free of barriers.”
The second focus of the plan is to stimulate investment and financing of cleantech production. “To keep European industry attractive, one has to be competitive with the offers and incentives currently available outside the EU,” von der Leyen noted.
For this reason, the bloc should temporarily adjust its state aid rules to make them faster and easier for calculations, procedures and approvals – such as the tax exemption. And to guarantee financial support across the Union, the Commission will set up a European Sovereignty Fund.
The GDIP will also aim to grow the skills and skilled workers needed to facilitate the transition. It will ultimately strive for global and open fair trade.
“Ensuring that clean technology delivers zero globally will require strong and resilient supply chains. Our economies will increasingly rely on international trade as the transition accelerates to open more markets and access the inputs needed by industry,” said the Commission’s chief.
While stressing the importance of international trade to the EU, she also stressed that “net-zero competition must be based on a level playing field.”
This reflects European concerns about the US Inflation Reduction Act (IRA) — a $369 billion clean technology grant package targeting North American-made products. Since the announcement of the act, several EU leaders have expressed their fears because of the potential to discriminate against or attract Union-based companies to the US.
“Our goal must be to avoid disruptions in transatlantic trade and investment. We must work to ensure that our respective stimulus programs are fair and mutually reinforcing,” said von der Leyen.
The fair trade requirement also targets China, which, according to the Commission chief, not only restricts access to its market for EU companies active in the sector, but also encourages them to relocate all or part of their production.
Von der Leyen expressed the readiness of the EU to find common solutions with both nations and to promote beneficial partnerships. But balancing these relationships won’t be easy.
On the same day, she addressed the World Economic Forum, the Dutch tech industry group FME early the Commission for “more unified action” on whether or not to support new ones US restrictions on chip exports to Chinaan important part of Washington’s strategy in its rivalry with Beijing.
The Netherlands is home base ASML Holding NV, a major European semiconductor manufacturer. About 15% of sales went to China in 2021, translating to a turnover of €2 billion, meaning that the adoption of the US rules could have a negative effect on the country.
In conversation with TNW, Mark Lippett – UK-based chip specialist and CEO XMOS — emphasized that China is “closely intertwined” in the global semiconductor supply chain, meaning that “each nation must be very selective when it comes to limiting the sale of certain products to Chinese companies.”
“If your company is in the hands of US interests, that balance sheet will be under severe strain,” he added. “To use ASML as a well-documented example, the company’s U.S. management has instructed it to ‘suspend – either directly or indirectly – any service, shipment or support to customers in China until further notice.'”
According to Lippett, the EU could afford to offset ASML’s losses to some extent if it left the Chinese market, the expected protection against the European Chip Act probably wouldn’t come in time for companies that rely entirely on China for revenue.
And while von der Leyen suggested “risk reduction” rather than “decoupling” when it comes to the Asian country, she stressed that the EU “will not hesitate” to investigate unfair practices that distort the market.
Overall, the EU’s position in this situation is a balancing act between geopolitical interests and rapid new initiatives, while maintaining focus and funding for existing ones. It remains to be seen if and how the new Green Deal industry plan will further Europe’s goal of becoming a clean tech leader, but it certainly needs to strike its balance before the opportunity is over.
