Since the turn of the millennium, Europe’s industry has been through turmoil. Recessions, pandemics and war have harmed businesses just as they were trying to reconfigure their operations to reduce their climate impact including, since 2019, meeting new requirements under the EU Green Deal.
Now politics has swung to the right and the European Commission wants to help businesses recover their competitive edge – while still reducing their climate impact. The Clean Industrial Deal (CID), proposed in February, “outlines concrete actions to turn decarbonisation into a driver of growth for European industries,” the Commission says.
Pro-business politicians have celebrated the CID’s drive for competitiveness, while those more environmentally minded have expressed concern that the legislation could, despite the cake-and-eat-it rhetoric, ultimately water down decarbonisation efforts.
The political fight, in other words, is far from over. The European Parliament’s work on the CID will be led by the Committee on Industry, Research and Energy (ITRE), in a nod to the EU’s competitiveness commitments.
One person who will be at the heart of the Parliament’s action on the CID is the German MEP Christian Ehler. Ehler is the ITRE coordinator for the centre-right EPP group, the largest group in the parliament that is traditionally pro-business and was sceptical of some of the Green Deal’s more ambitious elements.
This article is part of The Parliament's latest policy report, "Delivering Europe's Clean Industrial Deal."
For Ehler, the CID is shaping up to be the most consequential chapter in his storied career across business and politics. Currently serving a fifth consecutive term as an MEP, Ehler previously held senior management positions in businesses across several sectors in Germany. So he knows what businesses want – and in his view, they’ve been held back by a lack of investment in the EU Single Market.
“We haven't been investing a lot in the last two decades into the common market and that has an effect,” Ehler told The Parliament in an interview. “We have been falling far behind our expectations and the potential for the common market. I think this is a discussion where we really have to go radical and it will be a painful discussion.”
Businesses from a wide range of sectors in Europe say the common market is still too fragmented, which has discouraged investment. While much legislation is set at a European level, differences between internal policies in member states can create issues.
Europe’s energy grid, which is at the heart of the CID, is a pertinent example. Despite the Baltic states joining the European energy grid earlier this year, the system is still fragmented and faces interconnectivity issues between member states. This means Europe only uses half of its grid potential, according to the Commission.
For Ehler, the EU institutions have over-regulated, tangling businesses in so much red tape that they’re unable to invest or innovate. “This kind of imperial overspread in terms of ambitious regulation kills the baby in the cradle,” he says.
Less burden, more buy-in
The CID aims to reduce the regulatory burden, with a particular focus on overlapping and contradictory requirements, to create greater simplicity for businesses. For example, it calls for simplification in the EU’s common energy market to remove many of the issues around permitting and licensing.
That should, in theory, make life easier for businesses without reducing regulatory standards – which has created a sense of optimism and momentum among lawmakers, Ehler says: “The Parliament is more aligned than I thought.”
But when asked how this alignment looks in practice, traditional splits appear. “There is a sense of realism in terms of how much, let's say, a clean industrial deal is needed in order to make either, from a green perspective, the Green Deal possible or from a more competitiveness or growth-driven perspective to have a realistic perspective for the European economy,” Ehler added.
If the CID resembles a triangle with competitiveness, CO2 reduction and general sustainability forming the three sides, the relative weight given to each of these is still very much up for debate.
“I think it is a very problematic triangle because if you put an emphasis on everything at the same time, nothing is going to work,” Ehler says. He favours an approach that focuses on areas that can improve all three sides simultaneously: “Deepening of the energy market, the digital market with all its interconnection to the other issues, and then the fragmented capital market.”
The energy market in particular is closely linked to much of the legislation within the Green Deal. For Ehler, the consequences of getting it wrong would be catastrophic: “If we don't have a common energy market in Europe, the Green Deal is going to fail,” he argues.
Reality-driven climate targets
Some in Europe’s climate community say the CID is on course to kill the Green Deal in its current form. “Although it is certainly industrial, it is far from clean,” Carbon Market Watch’s Executive Director Sabine Frank said shortly after the proposal was published.
In the CID proposal, the Commission reinforced its commitment to the Green Deal aiming to ultimately become a net-zero economy by 2050, with a 55% net greenhouse gas emissions reduction target still in place for 2030, and a 2040 target of 90%. But it gave few indications of how this would be achieved in practice.
With the EU on course to miss those targets, ambitions are already being scaled back. European carmakers have been granted a three-year delay on fines that were set to kick in this year for failing to meet emissions targets, for example.
Ehler says the shift represents an acknowledgement of reality. “I think there is a growing understanding that the climate ambition is a generational task,” he says. Since the Covid-19 pandemic in 2020, just one year after the Green Deal, citizens have become more concerned about financial stability and the cost of living than about cutting emissions, even amongst younger generations.
In hindsight, Ehler says the EU should have built a much stronger foundation for major economic disruption before mandating such dramatic changes in legislation. “We did everything at the same time and then we had been terribly neglecting the framework conditions which would lead to the success of the Green Deal in Europe,” he says.
To recover momentum and make green ambition work for businesses, Ehler says legislation needs to be broken down into more targeted actions. “In real terms, it's very sector-specific, and I think we have been neglecting that sector-specific kind of accompanying aspect,” he says.
A veteran of both politics and business, Ehler sees an alignment of those two worlds as the only way the CID can succeed. “What's important is that we're not just talking about the economy or about the industry, [but] that we are talking with the industry,” he says.
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