12. 09. 2023
AUTHOR: Neil Makaroff
European Commission President Ursula von der Leyen will deliver the eagerly awaited State of the Union address on Wednesday. With less than a year to go until the end of her term at the top of the European Commission, it is an opportunity to take stock of her flagship programme, the European Green Deal, but also to outline what remains to be done.
The European Green Deal is the best strategic option for Europe
In the space of four years, the Green Deal has changed the face of the European Union (EU). Europe has adopted the most far-reaching series of climate laws ever and dedicated 40% of its economic recovery plan to the net-zero transition. As a result, our recent report, Competing in the new zero-carbon industrial era, shows that the European economy is the second most attractive for net zero investment. More importantly, Europe has the most decarbonised economy compared with the United States, China, India and Japan:
- 22% of Europe's electricity comes from solar and wind,
- Europeans have more electric cars per capita than anyone else, and
- Europe leads in heat pump installations globally.
Much more than a simple plan to tackle climate emergency, it has become a strategic choice for Europe to face the polycrisis. On a continent with limited gas or oil resources, the net-zero transition is the only way to reduce the energy dependence vis-à-vis certain gas and oil states such as Russia. It is also a way to reduce the impact of international energy markets on the prices Europeans pay in their daily lives. And this is just the beginning, as Europe's Green Deal laws will enable Europeans to cut their gas consumption by a third by 2030, almost equivalent to Germany's consumption in 2021.
The job is not yet done
Europe's leaders cannot rest on their laurels. Data clearly shows that China dominates the deployment of zero-carbon technologies with 55% of the world's new renewable capacity installed in China. More worryingly, China controls 60% of the supply chain for net-zero technologies such as solar panels and batteries. It is positioning itself to become the world's zero-carbon factory. This poses a serious risk to other economies, as their transformation will depend on Chinese technology supply.
The Biden administration has responded decisively, unleashing the firepower of its investment with the Inflation Reduction Act (IRA). The US is leading the way in zero-carbon innovation and plans to increase its renewable energy and electric vehicle manufacturing capacity tenfold. In other words, Europe's lead could quickly disappear in the face of these largest economies.
Worst of all, Europe could miss out on the industrial phase of the net-zero transition and remain just a "green" consumer, importing most of the technologies it needs to make the transition at lower cost. This means failing to seize the unique opportunity to create thousands of jobs and reindustrialise the economy.
Time to think about the next steps of the European Green Deal
While President von der Leyen made the European Green Deal a robust deployment tool, it is time to turn it into an industrial plan for Europe. This requires clear targets for net-zero technology production in Europe as initiated by the Net-Zero Industrial Act (NZIA), while also scaling up fresh investments. The Commission estimates that at least €92 billion is needed between now and 2030 to build a solid industrial base, but only €8 billion is available for this in the European budget. The rest is left to the Member States, widening existing disparities. Apart from Germany and France, few countries have the fiscal capacity to enter this race for zero-carbon factories on an EU scale.
A new financial architecture for climate would be needed as well as a clear direction of travel. European investment could help to attract factories for new innovative solar panels, industrial heat pumps or batteries to regions suffering from multiple industrial decline, such as Hauts-de-France, Silesia, Saar or Asturias. This would ensure the best possible distribution of the fruits of this new industrial era and create thousands of quality jobs.
A European success can only be achieved if EU leaders and the next Commission President think about the next steps of the Green Deal as an industrial plan for Europe.
