In February, industrialists gathered in Antwerp, the Netherlands, to present a ten-point plan for a so-called ‘Industrial Deal’, which should complement the Green Deal and strengthen the competitiveness of European industry. I believe that these are two sides of the same coin. The green transformation of our industrial base provides an opportunity to strengthen European autonomy, reverse de-industrialisation, bring more jobs and help us meet climate and environmental targets. We should not complement or weaken the Green Deal but reinforce and strengthen it; we need to use the new legislative term to build a European Green Industrial Deal.
This won’t be easy. Europe’s electricity production will need to multiply and industry investments will need to be higher by a factor of six than in the previous decade. We will have to modernise energy intensive sectors like cement, steel and chemicals, scale up new green manufacturing industries like wind, heat pumps and electrolysers, and co-ordinate the scaling down of industrial activities which have little to no future in a fossil-free society while ensuring proper protection and re-skilling of workers.
Until now, many in Europe entrusted the market to do the job. Unfortunately, we can now conclude this approach is not working. Despite recent improvements, the price incentive given by the European Union carbon market remains uncertain and still too low, mostly due to free allocation. At the same time, industry is facing insufficient infrastructure, high electricity prices and limited demand for climate-friendly alternatives. National governments trying to mitigate these issues are caught in a subsidy race that is pitting countries against each other, driving a wedge in the internal market and keeping inefficiencies in the system.
Europe, therefore, needs industrial policy to support this transition. Both the European Commission and industry have realised this and are calling for action. However, in the current political environment, there is a huge risk of taking the wrong route: easing environmental targets and giving more room for national state aid. Let’s be crystal clear: this is not industrial policy, but a free pass for industrial laggards. Leaving the industrial transformation to the market and member states will not solve our challenges, nor put Europe in the global front seat of this transition.
Instead, we need more co-ordination of European industrial development and infrastructure, not less. We also need more regulation: to increase circularity of supply chains, to set up lead markets and create demand for clean materials and to strengthen price signals, including a shift in energy taxation. On top of that, we urgently need more European investments that push electrification, innovation and the scale-up of innovative technologies. This should all be accompanied by strong social conditionality to make sure not only companies but also workers benefit from the modernisation of our industrial base.
This is not a simple agenda, fitted for easy one-liners and the rhetoric of blame. It needs politicians willing to cross party lines, to co-operate and set aside self-interest. But by merging our climate and economic interests into one comprehensive strategy, it has the potential to be one of the strong underlying stories of the next mandate. It is high time for a European Green Industrial Deal. Let’s build it together.