(Finance) – The president of the European Commission, Ursula von der Leyenpresented this week the industrial plan for the Green Deal, the European response to the Inflation Reduction Act which with almost 370 billion euros has decided to focus on the green tech industry of North America to counter Chinese domination. However, a decision that risks displacing the European one, leaving it behind in the race for transition. One of the sectors most affected by the game is that ofautomotive and in particular that ofelectric car which would be forced to relocate its plants overseas to access the large incentive program designed in Washington.
If everyone a Brussels are convinced of the need for an answer, the financing method of the European business plan remain the main topic of discussion. The European Commission has proposed to ease restrictions on state aid but this solution risks favoring only those who can afford to incur more debt – certainly Germany, certainly not Italy – while it has postponed any decision on the creation of a European Sovereign Fund financed with common European debt, on the model of the Recovery Plan.
In this regard, the environmental NGO Transport & Environment has published a report that outlines the route to follow to achieve European independence in the green tech industry, hoping that the fund can count on at least 350 billion euros and that it will find “a control room” in Brussels to ensure that the resources are spent in a targeted and above all rapid manner. “The idea – he explains Veronica Aneris, director of the Transport & Environment division in Italy – is not to bypass the Member States, but to ensure that that money is used in strategic sectors, in useful times and ways and respecting a criterion of equity between the Member States. If the aim is to create a thriving European electric mobility industry, first of all it is necessary that the perimeter within which to use the funds is clear and limited to the most mature and effective decarbonisation solutions”.
So what do you think should be the governance system at the basis of the new European business plan?
In our view, the European response must respect four key criteria. First of all, it must “mirror” the US IRA, i.e. respond symmetrically to the incentives of the Biden administration. In simple words: investing in storage systems, electric vehicles, renewables. Not a penny elsewhere: to avoid unnecessary bias and ensure that there is a truly targeted response. To do this, the second criterion must be that of simplicity. We cannot afford bureaucratic barriers and hurdles again; the available funds will have to go to support production in the most direct way possible. Rewarding effective production, as the IRA does, is therefore the third criterion: we cannot encourage the creation of factories, or worse, pilot projects and incubators. The final product should be rewarded – for example the batteries – as the USA does. Thus, the dynamics of an economy of scale are also actively supported, to bring down the prices of new technologies, with a concrete benefit for citizens. Finally, we need a control room at European level that guarantees efficiency, but also fairness. A public finance policy of the Union must have the effect of minimizing economic and industrial inequalities between states, not widening or aggravating them.
The European Sovereign Fund could be built using a financing model already tested with the Recovery Plan to respond to the post-pandemic economic crisis. Your judgment on the Italian PNRR was very critical, how should this new fund differ?
There is a fundamental difference between that instrument and what we are talking about today: we are no longer thinking of countering a generalized crisis in the European economy, but of responding to the “greentech part” of the US IRA, which risks attracting a large part of production that we would like instead in Europe. Italy was the biggest beneficiary of the Recovery Plan. Although we were seriously behind the other European players in the reconversion process of the automotive industry, few crumbs went to electric mobility. The strategic importance of this sector has been failed to fully understand. If new funds were to arrive now, it will be essential to avoid the risk of repeating the same mistake.
The Italian electric car market is struggling to take off. In Italy last year the sales of BEV cars, pure electric ones, were less than 50 thousand, down by 27.1% compared to 2021. The market share slipped below the level of Spain (3.7%) while in Germany and France electric cars are now a consolidated reality (with market shares of 18% and 13.3% respectively). Why can’t they catch on here?
We are the only country that is recording negative trends, the gap with the other European partners is becoming worrying. We are a unique case, just as our incentive program is unique: Italy is the only one in Europe to finance the purchase of cars with internal combustion engines and emissions of up to 135 g/km of CO2. In short, we support the technology that we should replace, obviously with taxpayers’ money. The lack of strategic direction is evident. Also, our incentives are poorly designed. To give an example: we have a higher incentive ceiling for PHEVs (plug-in hybrid cars) than for electric ones. Among other things, this cap is the same as that for a traditional car, diesel or petrol. We have defined rules of the game, mechanisms of competition between the different technologies, which are by no means fair. Moreover, we also made a mistake in identifying the beneficiaries of these incentives: with the measures introduced last August, i.e. an increase in the subsidy for low-income families, we turned to a sector of society which today would hardly invest tens of thousands of euros for a new car.
So where to start to close the gap?
First of all, a review of car taxation, and company cars in particular. The company car is a strategic driving force to accelerate the transition to electric mobility. Given the rapid turnover of vehicles in corporate fleets, it is possible to create a large used electric car market in 2-3 years. It would be a concretely effective resource, it would allow many more citizens to buy an electric vehicle. Of course, the incentive system also needs to be reviewed: subsidies for diesel and petrol cars cannot continue until 2024. It is truly an unresponsible use of taxpayers’ money: the climate crisis is worsening, air quality is deteriorating, keeps the country nailed to the starting blocks in the race for sustainable mobility. A race in which all the big economies are participating. To understand: in the last two years the Italian government has allocated almost the same resources for the purchase of cars as the German one, around 2 billion. In Germany, however, there are 5-6 times the number of electric cars that circulate in Italy today. In Berlin they were very clear from the start: incentives only for cars with plugs. An analysis of the best European national policies tells us that by acting on a few fiscal levers such as the purchase tax, the fringe benefit for employees and the deductibility, the response from the markets is there. Our analysis of Italy shows that these kinds of revisions, if designed intelligently, can be cost-free to public purse; even more, it could even save the state money.
Could it be incentives alone that determine the demand for electric cars?
Those are crucial. At the same time, if the religious war that some are fighting against the electric car in Italy were to cease, we would certainly have a more aware and informed public opinion, less frightened by the transition. More inclined to change the ways, forms and technologies of private mobility.
This is on the demand side. As regards the supply side, the one that should directly benefit from the European industrial plan for the Green Deal, where are the limits of the Italian system?
In the first instance there is a limit of “clarity”, I would define it as such. What appears evident to all the major automotive groups, I am thinking of Volkswagen for example, is still the subject of debate in Italy. Well: electric mobility is the mobility of the future. This should no longer be in dispute, it is simply an established fact. When we think about safeguarding jobs, therefore, we should do it starting from here and asking ourselves what role we want to play in the near, indeed immediate, future of the automotive industry. Italy is moving late, but there is still a lot of potential to be captured in the European automotive value chain. Think of lithium refining, urban mining, remining, the circularity of batteries. We have been pioneers in developing industrial recycling chains, it is a field on which we could compete. But to do it effectively, we need to understand what skills we need to build distinctive assets, to position ourselves strategically on the market. And identifying the workers to whom training or re-training programs should be allocated to create those skills. Finally, we need to speed up processes and create a solid and coherent regulatory framework for electric mobility, to attract foreign investors. If we linger in the current situation, we will remain very unattractive, on the edge of a great industrial revolution.