Brussels has launched a major ideological battle over large-scale state intervention in European economies to finalize proposals to cut carbon emissions and match US ambitions on a green economy.
The European Commission will this week unveil long-awaited proposals aimed at boosting green industries and domestic supplies of key raw materials. This is the main board of the EU’s response to industrial competition from the US and China. Last week, Brussels proposed reforms that would allow capital to match the subsidies available in the US and elsewhere.
But the draft has sparked heated debate in Brussels, with more liberal EU member states opposing the distortion of free trade and open markets. Key friction points include the inclusion of environmentally friendly production targets, potential barriers to raw material imports, and the extent to which constraints on public subsidies need to be relaxed.
“There is no balance in this debate. We are only talking about sovereignty,” said an EU diplomat. “By doing these things, we will completely rebuild the European economy, but I am not convinced that we will actually get where we need to be in 10 or 20 years.”
Some of the most intense debate has been over the net-zero industry proposal, a direct response to the U.S. Inflation Reduction Act announced last August. US bill provides her $369 billion for clean energy technologies. It’s a massive incentive package, and EU officials fear a transatlantic exodus of companies.
In the leaked EU draft response, domestic production in the five main sectors – solar, wind, heat pumps, batteries and electrolysers – should meet at least 40% of the block’s total requirements. The highest target set is in the wind and heat pump sector, at 85%.
But as negotiations over the final bill continued into this week, the draft bill repeatedly dropped and reinstated certain industry targets.
Competition advocates want a more open list of technologies considered “strategic net-zero” industries, according to one EU official, while Internal Market Commissioner Thierry Breton wants a more fixed set of sectors. was “Bretons are all about pushing what we have,” they said.
Officials are also discussing rules that would require companies exporting minerals to the EU to meet standards such as environmental standards and workers’ rights.
A diplomat from a developing country said the EU was advancing a “rapid set of requirements” that made trade with the EU “very expensive”.
The EU is already immersed in tough debates about how far to loosen restrictions on state aid as it seeks to compete with US and Chinese subsidies. “We risk entering into a costly and inefficient subsidy race,” Trade Commissioner Valdis Dombrowski warned journalists on Thursday.
Member states such as the Netherlands, Sweden, Denmark and Ireland are more concerned with maintaining a level playing field within the single market rather than allowing the larger economy to pour massive amounts of public subsidies into industry. emphasizes its importance.
Ireland’s business minister, Simon Coveney, said the EU had to “be careful not to go too far” in loosening subsidy rules. He also warned against “protectionist policies”.
“A small open economy like ours will lose,” Mariin Ratnik, Estonia’s chief trade diplomat, told the FT.
An EU diplomat said France in particular was promoting opportunities to shape European industrial policy. “We are building European competitiveness with subsidies. Free markets and open trade are no longer on the table,” said the diplomat.
Raphaël Glucksmann, a French socialist MEP who chairs the European Parliament’s Committee on Foreign Interference, said Europe’s push for cheap solar energy is an indication that the EU’s free-trade policy is an incentive to other countries. He said it was a good example of increased dependence.
“Thirty years of ideology have led to the great paradox of our time: dependence. Thirty years of deregulation and free trade policies have led to the victory of the CCP,” he said. “It is a Faustian pact between market-oriented ideologues and communists.