Leveraging the Green Deal for an Industrial Revolution
The clean tech industrial revolution is underway. In this global race to net zero, the European industry is well equipped to play a leading role thanks to the European Green Deal, the Fit for 55 Package, the RePowerEU Plan and the Net Zero Industry Act.
Clean tech is no longer just about fighting the climate crisis. With Russia’s war against Ukraine, the ensuing gas supply shock and the fossil fuel price crisis, renewables and electrification-based technologies have secured their position at the top of the affordability and security agenda.
If we want to get to climate neutrality in 2050, Europe will need a massive scale-up of clean tech manufacturing in the next years. With the Net Zero Industry Act we aim to manufacture at least 40% of our deployment needs in Europe.
We will continue to trade with our partners; not everything will be made in Europe, but more should be made in Europe.
Many industrial economies have focused their energy transition strategy strongly – and in some cases even exclusively – on subsidies for clean tech. The European way is based on three pillars.
First: climate-oriented funding like the Innovation Fund and Recovery and Resilience Facility. Second: market-based tools and enablers such as EU Emissions Trading Scheme and a more interconnected single energy market. And third: a new ambitious regulatory framework that promotes an energy sector based on renewables and energy efficiency, sustainable resource use and clean transport.
Above it all, a Climate Law which enshrines Europe’s long-term goals in a legal framework provides long-term certainty. The European way will deliver the best value for money for European citizens, a more competitive economy and a better performing industry, which is ready to face global competition for decades to come. Clean tech is a booming market, and the more we enhance our competitive advantage, the more quality jobs can be created in Europe.
For this model to perform at its best we need to do better at pooling resources for clean tech investments at the EU-level. The European Hydrogen Bank, with the first EU-wide auction for producing renewable hydrogen, is an example of what we can aim to achieve – a single point of entry to an emerging clean tech market for the global investment community.
Hydrogen is an industry where the EU is still well ahead of global competition. Over 50% of installed electrolyser capacity and over 50% of electrolyser manufacturing capacity is here in the EU. To maintain that lead as the technology will move to mass production, we need to build up hydrogen value chains.
The new European Hydrogen Bank will help to bridge the current investment gap, where potential suppliers aren’t sure of having enough demand, and companies weighing whether to switch to hydrogen aren’t sure of having enough supply. A first auction worth €800 million will be funded through the Innovation Fund and is due to be launched this autumn.
For renewable hydrogen produced in the EU, the Bank will cover the difference between the cost of producing renewable hydrogen and the price that the market is willing to pay. The exact amount of this green premium will result from a competitive bidding process: renewable hydrogen producers who require the lowest amount of support in terms of euros per kilo of hydrogen produced will win the auction.
This approach could be used to roll out similar auctions for other clean tech manufacturing challenges, such as batteries or offshore wind. It will fall to EU Member States to decide on this, but it is clear that new joint funding through the Innovation Fund is a solid way to further boost clean tech in Europe. The fund is financed by the market itself – through ETS-revenues – and already supports industrial decarbonization, renewables and clean tech in Europe. Demand for the fund is very high and it has proven to be a very effective instrument to reward the most competitive innovation in Europe.
Europe has led the way with the adoption of ambitious climate targets. We were the first major economy to commit to climate neutrality over three years ago. Since then, most industrialised economies have followed suit.
Today Europe will again lead the way in phasing out fossil fuels, where others think they can keep both economic development models alive in parallel. We will also lead the way in making this industrial revolution not only relevant for our climate goals, but also for our environmental objectives: abundant clean water, clean air and an environment free from toxic waste.
Europe is a good place to invest in clean tech. Investors which chose Europe know that their business case doesn’t rely exclusively on subsidies. They can rely on our policy framework to guide towards the most competitive outcomes and future-proof solutions which not only limit the carbon footprint but also the impact on water, soil and air. This is the real industrial competitiveness of the future we want to build with the industries which invest in Europe.
All in all, Europe is ready for the race to net zero. It’s a good race to be in because everyone who is in the race will win if they move fast and I’m confident that Europe is in pole position to become the first climate-neutral continent on this planet.
