THE STATE OF THE EUROPEAN UNION Towards a new legislative term

THE MEMBER STATES HAVE TO MAKE SOME FAR-REACHING DECISIONS: WHAT CAN A COMMON EUROPEAN INDUSTRIAL STRATEGY LOOK LIKE IN THE CLIMATE-NEUTRAL AGE? 101 ties than smaller countries), which puts pressure on the internal market. In any case, closer cooperation is still necessary for this mega-task. Otherwise, there is a risk of wasting scarce resources by setting up parallel struc- tures. It is thus important to jointly apply synergies and economies of scale in the newly emerging supply chains for green technologies. Even with this Green Deal Industrial Plan, the EU is still a long way from the state interventionism and debt mutualization that critics have accused it of. It will not work without start-up financing and risk hedging. There is no risk that companies and industries will become un- competitive as a result of permanent financial injections from the public sector. But without start-up funding, competitiveness quickly becomes a lost cause. Energy as the key to sovereignty The Russian attack on Ukraine initiated an upheaval in European energy policy through the subsequent wide- spread cut-off of energy supplies. Since then, the EU has found itself in a geopolitical dilemma: on the one hand, it wants to maintain its model of largely open energy markets; on the other hand, it finds itself in a world in which the energy policies of many partners are increasingly determined by other goals. The challenge of harmonising long-term climate goals and short-term security of supply remains as well. Last but not least, the relationship between energy security and industrial policy will have to be rebalanced in the future. All of this will require the EU to pursue a coordinated external energy policy. However, the Russian invasion of Ukraine has also made the tensions regarding energy policies between European governments more apparent. Each Member State decides on its own energy mix, a situation that has developed historically, makes economic sense in view of the very different domestic resources, external partners and specific preferences of different countries, and will remain so even if the Energy Union is deepened. Any- thing else would be unenforceable, either at government level or among the population. Accordingly, a European energy policy orchestrated in Brussels is not in sight. The resulting differences, however, are already sig- nificantly complicating the implementation of the indi- vidual measures in the context of the Fit for 55 package. But stronger coordination will also be needed internally. A common European industrial policy Is a long way off, but it is necessary. The current industrial policy struc- ture in Europe and the potentials in the production of renewable energies do not match. Will it be possible to keep energy-intensive production, such as the ammonia and aluminium industries, in Europe? Or should Euro- peans focus on selected clean tech sectors and let go of those in which they have comparative disadvantages compared to other world regions? It is not possible to argue for a purely market-based approach after the experience of the pandemic and the Russian war in Ukraine, with its disrupted supply chains and imports. The goals of security of supply and sov- ereignty are now generally shared. At the same time, financial resources are limited, partly because of the consequences of the pandemic and the war. What is it worth to Europeans to keep or build up central industrial sectors in the region? Is there a need for a European solar industry when significant capacities are now also being built up outside China in various economies such as the USA and India, so that a differentiated supply chain would presumably be guaranteed? Or should the EU, with its excellent research capacities, serve high- tech areas and leave mass production to economies with lower energy costs? Is it possible to at least better adapt Europe’s industrial architecture to the potentials of the individual Member States in power generation, while securing the greatest possible autonomy in vari- ous sectors? So far, this debate has not been conducted strategically, either in Brussels or in individual Member States, let alone between Member States. And while it is true that such talks will not be easy, they are neverthe- less necessary. European state aid policy worked well as long as it was not primarily about industrial policy. But the start- ing conditions have changed massively. In future, aid should have a much stronger strategic component.