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? 99 reached new heights. Structural and industrial policy in Europe is now experiencing a revival due to the fear of possible relocations of existing companies and entire industries and, even more important, the fear of not get- ting a slice of the beautiful green cake of clean technol- ogy industries. The upheaval has already begun with Russia’s inva- sion of Ukraine and the subsequent energy and price crisis. And the pace is being accelerated further by look- ing to the competitors. The economic heavyweights have set the pace. China has announced investments in clean technologies amounting to more than USD 280 billion. The US is mobilising more than USD 360 billion for similar projects through the Inflation Reduction Act (IRA), and as these are largely tax credits, the actual amount could be even higher. And Japan, India, the UK, Canada and South Korea have also announced similar programmes. A European response was accordingly eagerly await- ed.The EU Commission’s Green Deal Industrial Plan, pre- sented in spring 2023, includes a number of proposals concerning state aid, faster approvals, trade agreements and the promotion of the skills needed for the transition. Many of these instruments are already well-known, the eternally contentious question of financing could not be solved and some important aspects definitely require more attention. But overall, the direction is right. The message is overdue and it fits the times: indus- trial and structural policy are experiencing a comeback in Europe. The financial, Euro- and Covid-19 crises have already changed the perception of the role of the state. The market does not settle everything, especially not in times of crisis. What matters, however, is the interplay between the state and the private sector. The stakes are high: jobs as well as Europe’s sovereignty are at stake. A simple copy and paste of the USA’s IRA, for exam- ple, can obviously not be the solution. Europeans must find their own answers. Support is needed for the intro- duction of new technologies, for research and develop- ment and for ramping up production. Unlike in the past, the entire supply chain must be considered. It is clear that the supply chains should be shifted back to Europe and neighbouring regions in order to reduce depend- ency on difficult suppliers. Europe is still well positioned for groundbreaking innovations. But there is a need for clearer, more harmonized rules based on common ob- jectives, and more cross-border industrial alliances. From the EU Innovation Fund to the European Battery Alli- ance, there are successful models to build on. Some things can be learned from the IRA. Represent- atives of the business community like to point out that everything happens faster in the USA and that the op- portunities are more in focus rather than the problems. The EU, on the other hand, is continually shifting its fo- cus, which costs valuable time. This can be observed, for example, in the hydrogen ramp-up.While the Europeans are still engaged in doctrinal debates, the formerly un- enthusiastic Americans are now making rapid progress. And the plethora of regulations and proposals, along with the multi-layered areas of responsibility, means that the business community does not have clarity, lead- ing to a lack of certainty which is toxic for investments that are supposed to pay off over ten or fifteen years. To show that it has learned the lesson, the EU Com- mission presented the Net Zero Industry Act as the first part of its Green Deal Industrial Plan in April. This is in- tended to drive European production of green technolo- gies. The act focuses on key technologies, and specifical- ly mentions batteries, wind turbines, heat pumps, solar panels, electrolysers, and carbon capture and storage technologies. However, the fact that the Commission has taken a rather vague position on the decarbonisa- tion of heavy industry has been criticised. The proposals are intended to kill two birds with one stone. The EU does not want to be left behind in the markets of the future while at the same time the massive expansion of renewables and hydrogen is needed in order to get back within striking distance of its competitors. Europe is far behind the USA in terms of energy costs, and this is likely to remain the case, constituting a double burden for industrial location. Furthermore, in the context of the Net Zero Industry Act, approval procedures are to be tightened, incen- tives for cross-border projects created and bureaucracy reduced. This is sorely needed. Europe must not only boost the pace of ecological industrial policy but above all must do so collaboratively. Coexistence instead of cooperation wastes scarce resources, creates internal competition and even has mutually contradictory ef- fects. This fragmentation weakens Europe in interna- tional competition.