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News

Irina Patrahau: “EU Green Deal Industrial Plan is a step in the right direction”

February 23, 2023

Brussels’ proposals for green industrialisation lack detail and direction, say European businesses – especially compared to the hefty incentives offered by the US government and the country’s net zero market growth prospects.

The US offer of billions of dollars’ worth of green incentives under its Inflation Reduction Act has spurred the EU to extend a lifeline to European companies who might already be tempted to decamp across the Atlantic. Yet, as it stands, it isn’t clear if the EU will be able to deliver the support the business community needs. The EU’s Green Deal Industrial Plan has yet to impress many homegrown companies, with early-stage businesses especially expressing both disappointment and concern. The proposal, which was presented on February 1, leverages and accelerates existing funds through REPowerEU, InvestEU and the Innovation Fund. The plan is still being debated in Brussels.

Unlike the US Inflation Reduction Act, which provides some $369bn worth of green subsidies, loans and tax breaks, the EU’s proposal is at an earlier stage of approval, and the bloc lacks the capacity to deliver the same incentives to scale for early stage companies as it is not a sovereign state with the same fiscal bandwidth. The EU cannot be seen as distorting the level playing field of the internal market; further, it has to administer grants through what companies find to be a time-consuming process.

The hundreds of billions of euros the EU has set aside for the green transition over the next decade matches, if not surpasses, what has been mobilised in the US but it is the local market opportunities that have piqued European investors’ interest. Few dispute that the EU’s plan is a step in the right direction but many claim that it falls short of the targeted incentives laid out in the US package.

One clearly targeted sector is hydrogen. As part of its green industrial plan, the EU has announced it will support the production of clean hydrogen through a competitive auction, budgeted at €800mn, in 2023. Meanwhile, the US has made greater efforts to spur on its hydrogen market. Last year, the US department of energy announced an $8bn programme to develop clean hydrogen hubs composed of producers, consumers and local connective infrastructure.

Irina Patrahau, strategic analyst at the Hague Centre for Strategic Studies (HCSS) think-tank, maintains that the EU’s action plan “is a good step in the right direction”, even if it lacks clarity on certain issues.

“The US is a sovereign country, while the EU has to compromise with member states. The EU therefore works more with non binding acts. As of now, the Green Deal Industrial Plan lacks detail on what constitutes cleantech, technological neutrality, or how its plan will work in practice,” Patrahau says. “But this is how the EU works: they give guidelines and if approved, they then come up with proposals for legislation.”

That said, the “EU will need to win the trust of European start-ups that this is a stable, long-term path [the bloc] is embarking on”, Patrahau adds. An EU spokesperson did not respond to requests for comment.

Source: Sustainable Views

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