Vulcan Insight | EU Commission presents Green Deal Industrial Plan for the Net-Zero Age

Ever since the U.S. government presented its Inflation Reduction Act (IRA), the EU has considered how best to respond. In response, on Wednesday, the European Commission presented its Green Deal Industrial Plan. The plan aims to boost the Union’s net-zero industry and its competitiveness with a focus on the transition to climate neutrality.

With the European Green Deal, the 27 EU Member States want to become climate neutral by 2050. In a first step, greenhouse gas emissions are to be reduced by at least 55% by 2030 compared to 1990 levels. The EU’s industrial strategy announced in March 2020, laid the foundations for an industrial policy that would support the twin transitions to a green and digital economy. In the context of the Russian war of aggression against Ukraine as well as the changing geopolitical environment and increasing energy prices in relation to the war, the Commission wants to speed up the transition of net-zero industries. The Green Deal Industrial Plan aims to ensure this transition and thereby guarantee competitiveness. It includes targets for industrial capacity, lower regulatory burdens and a relaxation of subsidy rules across the EU. The Green Deal Industrial Plan is built upon the following four pillars:

1. Creating a conducive regulatory environment
2. National and EU funding
3. Enhancing skills
4. An ambitious trade agenda

Pillar One consists of the so-called Net-Zero Industry Act. This will seek to create a simpler and quicker regulatory framework, incentivise multi-country projects, focus on cutting red tape and set targets for 2023. The Critical Raw Materials Act is also part of Pillar One. The aim of this Act is to facilitate the extraction of materials, and recycling of substances and enable the search for substitutes.

Pillar two seeks to promote investment in strategic sectors and encourage the use of state aid at a national level. Further, the EU’s Temporary Crisis Framework, which is already in place, will be further adapted to net-zero industry requirements. Changes made will be temporary until December 2025. Although the Commission acknowledges in the draft communication that the EU “must step up EU funding”, the communication goes into little detail on how these proposed measures will be funded. It seems the Commission plans to rely mainly on existing EU funds to achieve its targets. Yet, it is noted that the InvestEU programme should be strengthened between 2024 and 2027 and that a European Sovereignty Fund will be announced before the summer. According to the Commission, more than €170 billion in investment is needed by 2030 to support the production of net-zero technologies.

In the third pillar, the Commission would like to address the lack of skilled personnel in relevant sectors through legislative proposals. Fourthly, the Commission will continue to work on a positive trade agenda.

The Act is expected to be discussed by EU leaders when they meet in Brussels on 9 and 10 February during the upcoming special European Council and by the European Parliament. Following von der Leyen’s Communication on the Industrial Plan, the Commissioner for Competition, Margrethe Vestager launched a new Consultation with Member States on her proposed Temporary Crisis and Transition Framework. The proposed changes include means to make aid simpler and faster, specific measures to prevent those at risk of relocating to a third country and simplified aid calculation.

Compliments of Vulcan Consulting – a member of the EACCNY.