Es should be a liberation. At least that is what the promises of the responsible politicians suggested. “In the global race towards climate neutrality, we want to put EU industry in the best possible competitive position,” said Frans Timmermans, Vice-President of the European Commission last Thursday as his agency presented its proposal to boost the industry.
“The EU must remain a leading industrial region that exports its products and technologies – and not jobs,” said Internal Market Commissioner Thierry Breton. The staff that the authority had set up for the presentation underlined the importance: Five commissioners and Commission President Ursula von der Leyen accompanied a whole package of projects last week that have one goal in common: European companies in international competition with China and the to strengthen the United States in the long term.
The three legislative proposals are the Net Zero Industry Regulation, which is intended to ensure that at least 40 percent of the green technologies used in the EU are also produced in the EU in the future. In addition, there is the law on critical raw materials, which is intended to boost the mining and recycling of scarce raw materials such as lithium. And finally, a reform of the EU electricity market, which is intended to protect companies from extremely high prices in the future and to promote investments in low-CO₂ electricity.
In addition, the European Commission has explained how it intends to strengthen the competitiveness of European companies in the long term: it should become more attractive for them to invest money in research and development, it should be easier for them to access capital, and the infrastructure in the EU is to be expanded.
The goals of the initiative from Brussels are also supported by business. The EU is under great geopolitical and industrial pressure, and the fear of being left behind by the USA and China is not only felt in Brussels.
Above all, US President Joe Biden’s Inflation Reduction Act (IRA) with its billions in subsidies and protectionist requirements has alarmed European politicians. The bulging industrial package from Brussels is also a reaction to the USA’s new, powerful industrial policy.
Strong criticism of the net zero industry regulation
From the point of view of companies, however, von der Leyen & Co. are not keeping their full-bodied promises. Above all, the net zero industry regulation is causing displeasure among companies. The Commission has not recognized the extent of the challenge, criticizes Markus Beyrer, the general director of Business Europe, the EU employers’ association. “The proposal for the net zero industry regulation falls short. The project thus risks impeding the transformation in Europe instead of promoting it.”
Similar criticism came from Germany immediately after the plans were presented. “The European Commission still hasn’t grasped the seriousness of the situation,” said Wolfgang Steiger, Secretary General of the Economic Council of the CDU.
The party-affiliated organization primarily represents the interests of medium-sized companies. “It is not enough to respond to the American Inflation Reduction Act with a bureaucratic counter-proposal.”
In the meantime, experts from the regulatory think tank Center for European Politics (CEP) have viewed the hundreds of pages of the Commission’s proposals. The researchers find many good approaches in this, but warn that the initiatives create more bureaucracy instead of relieving companies and that some of the projects even pose “risks for Europe’s future competitiveness”.
“The Commission is strategically too defensive with its projects and gets lost in small-scale instruments that force it to intervene bureaucratically. The much-heralded answer to the IRA could quickly become a largely ineffective air act,” says CEP board member Henning Vöpel.
Vöpel and three other researchers examined the proposals and found that they bring more bureaucracy and more government intervention. “The Commission is chasing goals that it cannot achieve itself, but which force it to intervene extensively in the internal market,” write the authors of the previously unpublished analysis, which is available to WELT.
CEP calls the proposed measures “unambitious”
This applies in particular to the energy sector. The plans to reorganize the electricity market, for example, should bring European companies cheaper electricity prices in the long term. However, it is “not to be expected that the announced measures in the energy sector will lead to competitive energy prices in the EU,” write the authors. Affordable electricity prices for industry and planning security for investors in renewable energies are needed.
The Commission’s plans to ensure the EU’s long-term competitiveness beyond the current decade are disappointing. “The measures mentioned by the Commission are not very ambitious,” write the authors of the previously unpublished analysis, which is available to WELT. “In large parts, existing measures and programs are simply listed, which should either simply be continued or only slightly adjusted.”
What is lacking on the one hand threatens to become too much on the other: The analysts judge that the laws have created additional bureaucracy – even though it is the Commission’s declared aim to relieve companies of bureaucracy. In the coming years, the authority wants to reduce the reporting requirements for companies by an impressive 25 percent.
At the same time, however, new testing and documentation obligations would be created, the researchers complain, for example in the planned EU supply chain law. The conclusion of the analysis: “It is paradoxical that the explicit intention to reduce the burden of bureaucracy, with the drafts, however, gives reason to fear much more bureaucracy.”
For example, the authority refers to the reform of European debt rules, which has been under discussion for three years, or cites the establishment of a new debt pot at EU level from which industrial subsidies are to be paid.
subsidy race with the United States
Economists have long warned against responding to Biden’s industrial program with debt-financed subsidies. On Tuesday, researchers from the ifo Institute renewed their warnings in an expert report for the Federal Ministry of Finance.
“The EU should avoid entering into a subsidy race to locate battery or solar cell factories that work with well-known technologies, that is self-defeating,” said Ifo President Clemens Fuest. However, it is questionable whether Finance Minister Christian Lindner, who commissioned the report, will be able to enforce this view in Brussels. France in particular is pushing for an expensive subsidy race with the USA.
“Everything on shares” is the daily stock exchange shot from the WELT business editorial team. Every morning from 5 a.m. with the financial journalists from WELT. For stock market experts and beginners. Subscribe to the podcast at Spotify, Apple Podcast, Amazon Music and Deezer. Or directly by RSS-Feed.