European Commission president Ursula von der Leyen said last year that she would create a new European Sovereignty Fund to help EU companies compete with president Biden’s Inflation Reduction Act (IRA). But whereas the US is pumping $369bn (€340 bn) into key industries like batteries and wind turbines, resistance from European capitals – notably Berlin – meant that the EU executive could only commit to a meagre €10 billion, under its mid-term review of its budget (MFF) announced today.
The IRA focuses on scaling up the production of green manufacturing by offering, for example, tax credits for batteries and wind turbines. The EU on the other hand plans to funnel the small funds it has made available to mostly research and development. Rather than provide fresh funds, the newly proposed ‘Strategic Technologies for Europe Platform’ overwhelmingly reshuffles money already available under existing funding plans. While a lot of money has been made available by Germany and France to support their own industries, this is not enough to compete with the US or China, says T&E.
Xavier Sol, sustainable finance director at T&E, said: “Washington and Beijing will be laughing at the EU’s weak proposal. There is a big mismatch between the strategic objectives of the EU’s green industrial policy and the cash that has been put on the table. Wealthy countries like Germany and France have to stop dragging their feet on fresh funds. In the long-term we will need a Europe-wide approach if the continent is to compete with the US and China in the global cleantech arms race.”
The EU’s Green Deal needs additional and long-term joint EU funding to scale up key green tech, directly disbursed at the EU level. In the short term, T&E calls on the EU to ramp up clean tech manufacturing and critical metals processing with unused money from the Recovery and Resilience Facility (RRF) – the EU’s signature pandemic recovery fund. T&E also advises member states to beef up the EU’s Innovation Fund via additional revenues from the EU’s carbon market.