Europe still debating its Green Industrial Strategy

6 months ago 32

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It was one of the key talking points Monday’s election debate – how decarbonisation can drive Europe’s future prosperity.

Almost five years after the Green Deal was announced, this concept remains firmly embedded in Europe’s political consciousness.

Heavy hitters from across the political spectrum, including Emmanuel Macron, Teresa Ribera and Margrethe Vestager, all recently laid out visions for how the energy transition is the basis of Europe’s economy. The Letta Report echoed these points, and the forthcoming Draghi Report is expected to do the same.

It’s election time, so these interventions are largely political slogans. But even after five years, it’s not clear that Europe has managed to translate political slogans into a coherent policy framework.

A key element, the Net Zero Industry Act, which was passed by Parliament last week, is considered by many to be toothless.

At the time of the Act’s conception, an accompanying ‘Sovereignty Fund’ was also planned, to back up the new rules with serious cash.

However Europe’s subsequent fumbling on funding shows the existential challenge that industrial policy poses to the EU.

No fresh money materialised, thanks to deep scepticism from several national governments.

In the meantime the Commission relaxed State Aid rules. This move allowed individual countries to channel more cash to their green industries, in the face of Chinese and US competition.

France and Germany have jumped at the opportunity, accounted for over 70% of approved State Aid in the first 18 months after the rules were loosened.

This concentration of support to industry in just two countries is not consistent with the EU’s single-market, which promises free and fair competition between countries. To preserve the Single Market – the EU’s crown jewel – any industrial strategy funding would need to be decided in Brussels.

But this implies a bigger EU budget, more transfers between countries and – probably – common EU debt as a structural solution. Delivering this would mean crossing one of Europe’s deepest faultlines. It would represent a fundamental evolution of the EU.

Europe’s green industrial strategy is far more developed and coherent when it sits within ‘classic’ EU competencies – a deeper Energy Union, more muscular trade policy and circularity of goods and raw materials, for example.

But to be more than a talking point, the Green Industrial Strategy needs serious funding. Either Europe can deliver this or it cannot. Either outcome will be a critical moment in the EU’s journey.

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[Edited by Chris Powers]