The budget proposal released today fails to leverage transport decarbonisation to boost industrial competitiveness, T&E said, as resources allocated to scale up clean technologies are inadequate.
The budget’s new key program, the European Competitiveness Fund (ECF), only allocates €67 billion for the climate transition and industrial decarbonisation over a seven year period, €40 billion of which comes from an already existing instrument. However, public funding needs for transport cleantech manufacturing alone require €39 billion annually by 2030.
Support for critical technologies such as batteries and e-fuels for aviation and shipping is essential to boosting the bloc’s competitiveness, energy security and strategic autonomy. But the scarcity of funding in the ECF, together with the broad scope of technologies that qualify for funds, risks sidelining key transport investments. In the battery industry alone, up to 100,000 new jobs that could be created by 2030 are at risk with this proposal, T&E said.
The proposal does send some positive signals in support of an EU green industrial strategy. The ECF will be able to deploy production aid to ramp-up the manufacturing of clean products, while this wasn’t allowed in previous budgets. “Made in EU” requirements are also introduced, giving companies using local technologies and suppliers privileged access to EU funds.
Xavier Sol, Sustainable Finance Director at T&E, said: “This budget’s proposals include promising elements on production aid and local content, but the Competitiveness Fund, as proposed, is not yet the powerful green industrial engine it aims to be. Europe needs to develop and strengthen cleantech value chains and deploy green technologies at scale. Without sufficient financial firepower, it risks becoming an irrelevant player. It’s too little, but not too late to change course.”
A 35% target for climate and biodiversity investments enables investments in renewables, energy efficiency and climate resilience, but it is not sufficient to stay on track with EU climate objectives. Fossil fuel subsidies are not ruled out either. And the dismantling of the LIFE program, the EU's core instrument for climate and environmental action, is also concerning, T&E said.
The doubling of the Connecting Europe Facility (CEF) is welcome, but by leaving the implementation of key national rail projects in Member States’ hands, the Commission risks jeopardizing an effective deployment of the EU’s core rail network.
To finance the budget, T&E advises that lightly taxed and heavily polluting sectors, such as aviation and shipping, should be included in the plan. An EU-wide kerosene tax could generate approximately €21.25 billion annually if applied to all departing flights from the EU. Similarly, marine fuel taxes could raise about €24 billion annually.
Xavier Sol adds: “Europe needs a major investment boost to become more competitive, sustainable and prosperous. This requires a focused, impactful and predictable investment plan. This proposal is only a first timid step in that direction.”
