European Green Industry Plan: “Investment is missing”

European Green Industry Plan Investment is missing

“No more naivety, now action.” It is with this assertion that Thierry Breton, the European Commissioner in charge of the Internal Market, presented on Thursday 16 March the ambitions of the Commission in terms of a common industrial policy, in response to the American and Chinese measures. Two plans were presented: THE Net Zero Industry Act, aimed at boosting and subsidizing a zero-emissions industry, and theEuropean Raw Critical Materials Act, whose objective is to secure the supply of the Twenty-Seven in strategic raw materials. Decryption of this first roadmap with Thomas Pellerin-Carlin, director of the Europe program of the Institute for Climate Economics (I4CE).

L’Express: What’s in the Net Zero Industry Act presented yesterday by the European Commission?

Thomas Pellerin-Carlin: It records the intention to produce certain clean technologies in Europe (cleantech), essential to the ecological transition. But the objectives remain too vague and general for the moment. The text indicates that 40% of our needs for wind turbines, batteries, heat pumps, etc., should be produced in Europe. It is extremely modest and also relatively vague for investors and industrialists. The method for calculating this 40% is unclear. I believe that it is now necessary to set precise objectives, expressed in gigawatts for photovoltaic solar panels, in tonnes for the production of renewable hydrogen, etc. We are not there at all. The European Parliament and the Council will have to improve this text.

The other important aspect is the facilitation and acceleration of the issuance of permits for the construction of factories. The idea is as follows: if you ever want to build a factory that is used to produce heat pumps, you will benefit from priority at the national level. The project will be considered to be of strategic interest, administrative delays will be reduced. This is going in the right direction.

Are the openings of mines, for example of lithium or rare earths, also concerned by these administrative facilitations?

They are the subject of another regulation, on critical raw materials (European Raw Critical Materials Act), also presented by the European Commission. In this document, we also find the idea of ​​facilitating permits, in this case for mines that will extract raw material. The great challenge is to find the right balance between the idea of ​​acting quickly in order to respond to both economic and geopolitical issues, and the need to respond to the imperative of democracy and protection of the local environment. .

It is important to distinguish between the different types of projects. I don’t know, for example, of many demonstrations against the installation of a heat pump plant. On the contrary, they are rather well received because they create jobs. On the mines, there are other issues, with the risk of local pollution which can become hellish if the project is poorly designed.

Does the first version of this plan seem ambitious enough to you?

No. These proposals are a basis for discussion for a debate that will be long – several months, even one or two years. We must look at this text as a first basis for negotiation, allowing Parliament and the Council to debate each point of the text, to amend it in depth, and I hope to include production targets in Europe that are even more ambitious, detailed , and expressed in a way that speaks to entrepreneurs.

Between the “Made in China 2025” program launched in 2015 and the American plan to Inflation Reduction Act (IRA) adopted last summer, isn’t this European proposal coming too late?

Indeed, it has been almost 15 years since China embarked on a very ambitious and effective industrial policy, involving a set of financial tools such as subsidies benefiting national companies. China is today a dominant player, both in the sector of critical metals and in their refining, and in the manufacture of a set of cleantech fundamental to the global energy transition. These range from heat pumps to solar panels. On batteries, it clearly displays a dominant position with 75% of world production – even if Europe is catching up. The United States has also adopted a set of public investment plans for the climate. The IRA is the last of them. It runs over a 10-year horizon and represents between 400 and 800 billion dollars for the national green industry. It is considerable.

We are in a global race for cleantech. It has a climatic benefit – the more of us who run it very quickly, the better it is for the climate. It also has a geopolitical and economic interest. The market for the production of heat pumps, batteries, etc., is estimated at 650 billion dollars per year by 2030. If an economy is well positioned and manages to capture a large share of this cake, it is very interesting for her. And I’m only talking about 2030: these markets will continue to grow after that.

From a geopolitical point of view, China is today the dominant player. So without industry, we are in a situation of dependence. The United States have chosen not to be and have invested a lot of public money to allow their industrial sectors to develop. This race is not a sprint but a marathon. China and the United States are accelerating. We don’t have to react in a week. However, Europe must still act quickly and well. We must learn the lessons of 20 years of dependence on Russian gas which have put us in a difficult situation today.

Now a question arises: how do we reorganize the various economic systems to be able to stay in the race and, ideally, come out on top? In an ideal world, a European long-term investment plan for the climate would have already been adopted. But political constraints exist. The fruit is not yet ripe. The Commission works with its tools, and begins by defining objectives in terms of cleantech. This is the first stage of the European response. Other discussions will take place in the summer on budgetary and financial issues.

The text integrates the nuclear. Is this a victory for countries like France which support this industry?

For several years, several governments, including that of France, have wanted to ensure that nuclear power is not forgotten and that it is included everywhere. It is partially in this text. But for the moment, I do not yet know what the materiality will be. How much do we need new factories to build nuclear components, knowing that some already exist? At this stage, it remains difficult to see what falls under the economy, or a classic and highly politicized debate on the inclusion of nuclear power wherever possible.

Are there any aspects of the text that could be the subject of debate in the coming months?

If we want to decarbonize industry, the heating of our buildings and our modes of transport, we will need more heat pumps, batteries, wind turbines, solar, thermal and photovoltaic panels…

To achieve this, some advocate an approach of public intervention – what the economist Mariana Mazzucato calls the state entrepreneur. This time with the EU taking risks and setting sectoral objectives in order to create confidence, including in the private sector, and facilitate investment in new factories. This is a line present within the European Commission and certain ministries. On the other hand, a more traditional position consists in considering that any intervention is akin to dirigisme – a word that has come up often in Brussels in recent days. This debate crosses both the European Commission and the great nations of the Old Continent, like Germany.

But beyond the intellectual reflections on the role of the State in the economy, it is investment that remains the great absentee from this story. Because what entrepreneurs want is visibility on their access to financing, both private and public, in the short, medium and long term. This is the next step: build a European investment plan, ideally on all climate issues, at least on the particular issue of cleantech.

Europe must develop a plan at least comparable to those of the United States and China, otherwise it will fall considerably behind. The risk ? Relive with the cleantech the same difficulties as with the technology in the 2000s. We had leaders, but due to a combination of factors – national governments’ refusal to create a real European digital market, the reluctance of European investors, insufficient public investment – ​​we have probably fallen behind. As a result, our only option is to depend on China or the United States. Today in the cleantech, Europe must take its destiny into its own hands. As such, the next few months will be decisive.