Speaking at the World Economic Forum in Davos, EU Commission chief Ursula von der Leyen stressed the bloc’s need to boost its clean-tech industry and increase its competitiveness against the US and China – amid rising trade tensions with both nations.
The International Energy Agency (IEA) estimates that the market for mass-produced clean energy technologies will be worth around US$650 billion per year by 2030 – three times what it is today. And according to Von der Leyen, the envisaged net-zero transformation is already causing huge industrial, economic and geopolitical changes – leaving a small window of opportunity for the EU to invest and lead the industry.
The newly announced Green Deal Industrial Plan (GDIP) aims to make Europe the “home of clean technology”. To achieve this, it focuses on four main points: the regulatory environment, funding, capabilities and trading.
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The first pillar envisages creating a regulatory framework that simplifies and accelerates access to finance and permits, with a focus on critical net-zero sectors such as wind, solar and clean hydrogen. To support this, a new Net-Zero Industry Act will set clear targets for European cleantech by 2030. Essentially, it will target investments in strategic projects along the entire supply chain.
“So far, the EU taxonomy has flaws that hamper the inclusion and growth of innovative actors,” said Dr. Andreas Sichert – CEO of German clean-tech company Orcan Energy – told TNW in response to the GDIP. “We must use the small window of opportunity to encourage innovation and clean technologies and ensure their rapid scaling by creating a fertile regulatory environment free of deadlocks.”
The plan’s second focus is to drive investment and funding for clean-tech manufacturing. “To keep European industry attractive, it has to remain competitive with the offers and incentives that are currently available outside the EU,” von der Leyen said.
That’s why the bloc should temporarily adjust its aid rules to make them quicker and easier for calculations, procedures and approvals – like the tax break option. And to ensure financial support across the Union, the Commission will prepare a European Sovereignty Fund.
The GDIP will also aim to nurture the skills and skilled workers needed to facilitate the transition. It will finally try to promote global and open fair trade.
“For clean technologies to deliver net zero globally, strong and resilient supply chains are needed. Our economies will increasingly rely on international trade as the transition accelerates to open more markets and access the inputs needed by industry,” the commission chief said.
Cleantech is currently the fastest growing investment sector in Europe – doubling in value between 2020 and 2021.
While highlighting the importance of international trade for the EU, she also stressed that “net-zero competition must be based on a level playing field”.
This reflects European concerns about the US Inflation Reduction Act (IRA) – a $369 billion clean technology subsidy package targeting products made in North America. Since the law was announced, various EU leaders have expressed concerns that it could discriminate against or attract companies based in the Union to the US.
“Our goal should be to avoid disruption to transatlantic trade and investment. We should work towards ensuring that our respective incentive programs are fair and mutually reinforcing,” von der Leyen said.
The call for fair trade practices is also aimed at China, which – according to the commission chief – not only restricts access to its market for EU companies operating in the sector, but also encourages them to move all or part of their production there to relocate.
Von der Leyen expressed the EU’s willingness to find common solutions with both nations and to promote beneficial partnerships. But balancing those relationships won’t be easy.
On the same day that it addressed the World Economic Forum, Dutch technology industry group FME asked the Commission for “more unified action” on whether to support new US restrictions on chip exports to China, a key part of Washington’s strategy in its rivalry against Beijing.
The Netherlands is home to ASML Holding NV, a major European manufacturer of semiconductors. About 15% of sales went to China in 2021, amounting to €2 billion in sales, meaning the adoption of US rules could have a negative impact on the country.
Inside ASML’s clean room where lithography machines are manufactured. Credit: ASML
Speaking to TNW, Mark Lippett – chip specialist and CEO of UK-based XMOS – emphasized that China is “tightly intertwined” with the global semiconductor supply chain, which means that “each nation has to be very picky when it comes to selling certain Restricting products to Chinese companies.”
“When your company is owned by US interests, that balance is severely strained,” he added. “To cite ASML as a well-documented example, the company’s American management has instructed it ‘not to directly or indirectly serve, ship or support customers in China until further notice.'”
According to Lippett, while the EU could afford to compensate for the loss of ASML to some extent, the expected protection from Europe’s chip law would probably not come in time for companies that depend entirely on China for their revenue if she would leave the Chinese market.
And while Von der Leyen suggested “risk reduction” rather than “decoupling” when referring to the Asian country, she stressed that the EU “will not hesitate” to investigate unfair practices that distort the market.
Overall, the EU’s position in this situation is a balancing act between geopolitical interests and accelerating new initiatives while maintaining focus and funding for existing initiatives. It remains to be seen if and how the new Green Deal industrial plan will advance Europe’s goal of becoming a leader in clean technology, but it certainly needs to find its balance before the window of opportunity closes.