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Blogpost: Reactions to “A strong European Industry for a Sustainable Europe”

On 10 April, the European Commission issued a Communication on how to strengthen European industry, following the input of the Clean Transition Dialogues. The document is crammed with much-praised measures that have characterised the debate at least since the publication of the Green Deal Industrial Plan. These include creating industrial clusters like Hydrogen Valleys, ensuring uniform application of regulatory frameworks for net-zero technology investments, increasing financing support through the Innovation Fund and ETS revenues, and increasing the digitalisation of the energy sector.

With this document, the Commission essentially recognises the lacuna created by the Member States’ lack of implementation of the European Green Deal. However, it fails to deliver a concrete way forward. While the involvement of the EIB and the EBRD is much welcomed, this strategy should be adapted to cater for a more resilient energy system. For example, cleantech start-ups require more technical assistance to apply for funding, while grants and guarantees schemes should increase.

The European Commission’s plea to phase out subsidies for fossil fuels following the COP28 commitment, while welcomed, is clear proof of the existing gap between the debate at the EU, national, and regional levels. However, the Commission has played its part in this. Since 2019, the Commission has been partly responsible for the rollout of between €56 and €60 billion of subsidies per year directly flowing into fossil fuels. In 2022, the number reached €122 billion. A more committed approach towards climate neutrality should see these subsidies primarily going towards accelerating innovation in clean technologies, decarbonisation, and flexibility.

Beyond implicitly admitting shortcomings in terms of reaching local and regional areas and fostering the decarbonisation of Europe’s industry, this Communication fails to provide a new strategic definition of Europe’s energy resilience.

On the one hand, Russia’s war on Ukraine highlighted that the decarbonisation of our energy sector is not as advanced as we wished for, and the supply of remaining fossil sources is not diversified enough. We need to listen more to new actors and further diversify energy sources, not only energy partners. We will not achieve net-zero without new and well-implemented innovation. The Commission’s invitation to discuss various ways to make clean energy affordable for energy-intensive businesses (e.g. by facilitating access to PPA and reviewing taxes and network tariffs) is welcome and should be an area for further debate. The EU also needs to boost its competitive edge in developing cleantech. The potential is there, but IEA data portrays a more negative picture, with the EU falling behind China and the US in accelerating and implementing clean technologies. In the future, Europe’s dependency on Chinese clean technologies could backfire as was the case with overreliance on Russian gas.

On the other hand, while a thorough review of the CBAM is of the essence, its scope has been watered down outstandingly. Realistically, there is a clear threat that the roadmap gets reverted following the 2026 Commission’s review, considering the viewpoint of the potential next EU legislature. The design of the CBAM, taking into consideration third countries’ responsibility and vulnerability, would be better suited to ensure a fairer and more equitable implementation.

The Commission's proposal for enhanced diplomacy and collaborative efforts for supporting other economies in setting up their carbon pricing system is commendable. However, a dogmatic view on a global carbon price should be avoided in this process, instead, the EU should consider the differing circumstances in economies worldwide. Simultaneously, the potential of the recently launched Climate Club by the G7 for supporting greater international cooperation in emission-intensive sectors should be explored as part of the overarching strategy for climate diplomacy. Measures such as knowledge-sharing, capacity-building, and discussions on standards should be used in this process.

With its Communication, the European Commission essentially invites member states, industry, and stakeholders to comment on the way forward. Given EPICO’s ability to bridge the German and Brussels debate, and the significance of Germany’s industry for EU industrial policy, we are looking forward to taking part in this conversation.