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European Clean Industrial Deal adopted recently is the EU-wide business plan to accelerate decarbonisation and competitiveness for the European industrial sectors by boosting clean tech innovation and reinforcing regional resilience. The EU-wide Clean Industrial Deal is supported by the European €100 billion investment package.
Introduction
This Wednesday (i.e. 26 February 2025) was a historic day for the EU’s industrial community: the European Commission adopted the ever new Clean Industrial Deal. The EU executive’s plan suggests much-needed measures to slash energy prices and stimulate investment. However a big question remains: which industrial sectors and products should be saved in EU-wide and which should be closed down?
The “deal” will determine not only what the EU’s industry and job market would look like in the coming decades but also the bloc’s autonomy in such issues as, for example where to get aluminum for the wind turbines, cement for the construction sectors and steel for military purposes, to name a few.
Background
European industrial base is central to growth and essential for regional competitiveness as the continent has a rich industrial heritage: i.e. for decades, industries in the member states have been at the forefront of technological progress and fuelling economic growth and sustaining the regional social model.
The national industries need support for a “promising future”, while having the talents, the entrepreneurs, business owners, workers and consumers. The sector has the ability to drive innovation and shape global progress; it has a strong social market economy underpinned by a predictable legal environment and the resilient economy needs a robust industrial component.
However, Europe is grappling with rising geopolitical tensions, slow economic growth and technological competition. In this new era, it is clear that a competitiveness and decarbonisation strategy is also a security imperative.
The EU must urgently address three challenges at once: a climate crisis and its consequences, competitiveness concerns and economic resilience. As the Draghi report and the Competitiveness Compass highlight, decarbonisation policies are a powerful driver of growth when they are well integrated with industrial, competition, economic and trade policies.
The member states industries, particularly those experiencing high energy prices and fierce global competition, are facing existential challenges. The expert’s opinion is that the industrial sector is at risk being outpaced by other major powers in the world in terms of productivity growth.
On the set of urgent European actions in: https://commission.europa.eu/document/download/9db1c5c8-9e82-467b-ab6a-905feeb4b6b0_en
The “deal” is mainly focusing on two closely linked sectors: firstly energy-intensive industries, which require urgent support to decarbonise, electrify, as well as confront high energy costs, unfair global competition and complex regulations, harming their competitiveness. Secondly, the clean-tech sector, which is at the heart of future competitiveness and is necessary for industrial transformation, circularity and decarbonisation. It is indispensable to act for both to reach continental climate neutrality targets, absorb emissions and maintain water resilience, as well as ensure perspective production technologies made in EU to retain the regional ability to provide for the necessary solutions.
Seven core drivers for corporate sector in the “deal”
First, affordable energy: the EU’s energy prices are higher than those of trading partners, which is impacting competitiveness, especially for energy-intensive sectors. Thus, the Affordable Energy Action Plan will lower energy costs for business and citizens: the EU’s consumers pay 2-3 times more for energy than its competitors in the US and China. Then, the task of tackling volatile prices by making Power Purchase Agreements more attractive for industrial users: the following drivers are includes: switch to domestically produced clean energy, increase economy-wide electrification rate from 21.3% to 32% in 2030, and install 100 GW of renewable electricity capacity every year until 2030.
More on the recent new EU’s energy plans in: https://ec.europa.eu/commission/presscorner/detail/da/speech_25_626
Second, creating the “lead markets” to substitute for the lack of stable and predictable market demand for clean tech products. The following steps are to be taken: fostering demand for clean products made in the EU by introducing sustainability, resilience and European preference criteria in the member states’ public procurement for strategic sectors; creating product label indicating carbon intensity to allow businesses to reap a “green premium” and inform consumers; and reaching 40% of domestically produced key components of clean tech products on the EU market.
Third, financing issues. The lack of enough investments to support decarbonisation and electrification reduce competitiveness of the industry. The following steps are envisioned: – increasing the firepower of the Innovation Fund by more synergies between existing funding instruments; – leveraging private investment by amending InvestEU program; -simplified State aid rules to give the member states more flexibility in supporting decarbonisation; and – the Clean Industrial Deal will leverage more than € 100 billion investments supporting the industrial transition.
Fourth, the circularity and access to materials issues as a vital element in high dependence of EU industry on critical raw materials. As materials are not reused sufficiently, precious materials are being thrown away; hence the following measures are taken: – ensuring lower prices and higher availability for critical raw materials by organising joint purchases (through an EU Critical Raw Material Centre); – the New Circular Economy Act will reduce dependencies on primary materials imports and create business opportunities; – increasing circular material use rate from 11.8% today to 24% by 2030.
Fifth, global markets and international partnerships: the EU has scarce primary materials needed for the clean transition. Hence, the following measure shall be taken: – active participation in the global race for access to markets, raw materials and new technologies; – giving the European companies better access to third markets and essential inputs via trade agreements and Clean Trade and Investment Partnerships which will diversify sources of supply; – addressing global overcapacities being redirected to the EU market and intensifying international and multilateral cooperation; finally, ensuring the largest possible share of the global market for clean technologies worth $2 trillion by 2035.
Sixth, skills enhancement: businesses need access to workers with the right skills, as well as offering quality jobs and ensure just transition. The following steps are taken: – a new “Union of Skills” will ensure a skilled workforce for strategic industries, promote quality jobs and support workers in transition; – reducing the number of occupations requiring specific skills or knowledge for the clean transition where at least five EU states reported a shortage; in 2024, in 27 occupations at least 5 member states reported a shortage.
Seventh, simplification: complex regulations and administrative barriers can hinder industrial growth and the implementation of clean technologies. Hence, the following measures are at stake: – streamlining regulatory processes to facilitate faster adoption of innovations and reducing bureaucratic hurdles for businesses and SMEs; – speeding-up permitting for industrial decarbonisation projects; – simplifying State aid rules by 2025 to accelerate clean energy roll-out and supporting industrial decarbonisation; and – enhancing coordination between EU institutions and the national governance to reduce red tape and leverage the scale of the Single Market.
Source and reference to: https://ec.europa.eu/commission/presscorner/api/files/attachment/880548/Factsheet%20Clean%20Industrial%20Deal.pdf
Note about aluminium sector. As electricity costs quadrupled in 2022 (after the start of the Russia-Ukraine military conflict), the power price to produce one metric ton of primary aluminum suddenly hit more than €5,000, i.e. double the metal’s price on the global market.
More on the “green transition” problems in: https://www.politico.eu/article/europes-impossible-choice-which-industries-should-survive-the-green-transition/?utm_source=email&utm_medium=alert&utm_campaign=Europe%E2%80%99s%20impossible%20choice%3A%20Which%20industries%20should%20survive%20the%20green%20transition%3F