Slowing down the Green Deal would endanger European reindustrialisation

05. 10. 2023
AUTHOR: Neil Makaroff

On Friday 6 October 2023, 27 Heads of State and Government will meet in Granada, Spain, to discuss the priorities on which the European Union (EU) should focus after the June 2024 elections. In an op-ed for Le Monde, Director Neil Makaroff called on European leaders to support next steps of the European Green Deal and the green re-industrialisation of the continent.

In just a few years, the face of the EU has significantly changed. Its ambitious climate reforms, also known as the European Green Deal, have made Europe the most decarbonised economy in the world. Europe has the largest share of solar and wind power in its electricity supply, the greatest number of electric cars relative to its population, and is the world leader in the deployment of heat pumps. And that's just the beginning. By speeding up the development of renewable energies and encouraging energy savings, the Green Deal could enable the Union to cut its gas consumption by a third by 2030, representing considerable savings. Much more than just a plan to fight against the climate crisis, the Green Deal is a strategic and structural choice for Europe. The net-zero transition is the only way to free ourselves from fossil fuels and the volatility of their prices, which heavily affect both our economies and our citizens.

We must keep going. There has been a lot of talk recently about the need for a "pause" of the European Green Deal, which is considered by some to be too costly and difficult to implement. However, slowing down would be highly detrimental to Europe's future. The global race to net-zero is in full swing and the lead that Europe has achieved in some areas is far from secure. The United States is catching up with colossal investments. China has a strong hold on many industries, and is positioning itself as the global factory for the net-zero transition. Any slowdown or halt would inevitably lead to a European transition "Made in China" or "Made in the US".

It is therefore the right moment to consider and prepare the next stages of the Green Deal, specifically the industrial stages. The EU should seize the opportunity to generate tens of thousands of jobs, reindustrialise its economies and establish strong positions in net-zero technologies of tomorrow. European leaders can build on initial steps taken by the President of the European Commission, Ursula von der Leyen, who put forward targets for the production of zero-carbon technologies on European ground under the Net Zero Industry Act (NZIA).

In order to achieve this, we need to invest more than we have done so far. According to the Commission, at least €92 billion will be needed between now and 2030 to build a strong industrial base. Apart from Germany and France, however, few countries have the financial resources to attract green factories. The idea of a new European strategic investment plan is gaining ground and should be explored further. It could redirect some of the available funds towards the development of net-zero industries and coordinate Member States' investments, as well as mobilising new collective investment to ensure that at least 1% of GDP is invested into decarbonisation by public authorities annually. The taboo on joint investment must be broken in the face of competition from China and the US.

Similarly, despite the aspirations of certain politicians, lowering environmental standards would be a serious mistake. The Green Deal has made Europe the second most attractive economy for net-zero investment in 2022, according to figures compiled by Bloomberg NEF. The end of sales of new fuel, hybrid and diesel cars in 2035 is attracting many investors, including from Asia, to meet the demand for batteries in Europe. This is also the case for heat pumps. Tomorrow, why not set quotas for green steel in construction to encourage the electrification of heavy industry? Or standards for innovative solar panels using less critical materials? New rules like this could guarantee markets for Europe's zero-emission industries.

Finally, a coordinated industrial policy could also strengthen European cohesion. Joint investment could be directed towards establishing factories in regions that have suffered decades of industrial decline. France has made the Hauts-de-France the new battery valley, leading to a spectacular economic renaissance for Dunkirk and the surrounding region. Europe could follow suit, turning the Saar, Silesia and Asturias into bastions of solar energy, heat pumps and other net-zero technologies. This industrial phase of the Green Deal has the potential to create tens of thousands of jobs, offset the losses caused by the phase-out of fossil fuels and revitalise entire regions.

The transition to net zero is as essential as it is inevitable. Competition for market share in its key technologies is and will be fierce. In Granada, Europe's leaders, from President Macron to Chancellor Scholz and Prime Ministers Sanchez and Morawiecki, will have the opportunity to plan the next industrial and economic stages of the European Green Deal to consolidate Europe's position in this long-running race. China and the US show no signs of slowing down. Frankly, is this really the time for waiting?