A “green deal” industrial initiative proposed by the European Commission (EC) would see a minimum of 40 percent of the green energy technologies installed in European Union (EU) countries in 2030 made by businesses located there.
The proposal is an aspect of the EU’s declared goal of becoming carbon neutral by 2050.
To achieve that goal, the new plan emphasizes eight “strategic net-zero technologies”:
- batteries and energy storage
- carbon sequestration and storage, focusing on using old natural gas reservoirs as new carbon sinks
- fuel cells
- grid efficiencies and improvements
- heat pumps
To ensure factories have the vital minerals and materials they need to build green-tech hardware, the EU proposes to establish “low-carbon supply chains,” which would mean sourcing the materials closer to the continent.
It also calls for the union to work with geopolitically friendly countries to explore long-term supply contracts, such as the one with Chile that now provides Europe with 65 percent of its lithium. Australia is also seen as a possible partner.
The plan also insists that the region depend on no more than 65 percent of any one critical material on a single country.
The green deal industrial plan is, in part, a response to two external pressures.
One is China’s growing dominance in green energy technologies, including the processing of raw materials.
China has at least 60 percent of the world’s current capacity in manufacturing green energy technologies and makes about 40 percent of critical fuel cell components, according to the International Energy Agency.
The other is the USA’s Inflation Reduction Act (IRA), which established a pool of $369 billion in incentives for manufacturing facilities located in the U.S. that will build green energy hardware and other clean-tech infrastructure components.
The EU has criticized the IRA’s subsidies as “green protectionism” and for luring European firms to build new facilities in the U.S. instead of at home, as we reported in “Germany Fears Mass Exodus of Manufacturers” (29 Nov 2022) and “U.S., EU Still at Odds Over U.S. Green Manufacturing Subsidies” (6 Dec 2022).
The new green deal rests on four pillars:
- a simplified permitting and regulatory process that would see projects through to approval within nine to 12 months, instead of the two to seven years now typically required; each nation is to create a “one-stop permitting shop” to speed approvals
- accelerated investment, in part through looser rules around government subsidies to manufacturers
- creation of well-paid high-tech jobs through the creation of “net-zero academies” to train workers for well-paid jobs in low-carbon tech and that could draw qualified trainees and workers from outside of Europe
- fair competition and open trade among EU member nations, which will require refinement of trade agreements among the countries
To cut red tape, the EC has proposed a new Net-Zero Industry Act that will create “a regulatory framework suited for quick deployment” and a Critical Raw Materials Act to ensure manufacturers have the key minerals and materials they need to achieve the 40-percent target.
How countries will finance the green industrial deal remains an open question.
Also, all EU member nations must agree to the plan, its new laws, and details, which must be negotiated and agreed to through the European parliament.
TREND FORECAST: The goal of manufacturing at least 40 percent of all green energy hardware installed in Europe by 2030 is aspirational, not practical.
With European countries still deep in debt following the COVID War and last year’s cost-of-living crisis wrought by skyrocketing fuel prices, it is unclear how the massive undertaking could be paid for, other than governments shouldering even more debt even if companies and private investors put money in.
Also, the EU is starting from a position back in the pack in establishing supply chains for critical materials. It also holds little intellectual property in clean energy tech, meaning it will have to license or buy know-how from other countries.
Just as troublesome: EU nations have a long history of squabbling over just this kind of agreement. It could take until 2030 for the European parliament to agree on the details of the plan.
The EU’s green deal industrial initiative will speed the region’s transformation to a green energy future and a modern manufacturing sector, but the road ahead is winding and bumpy, not an autobahn to the next decade.