Greening the Industrial Strategy

Ursula von der Leyen and her Commission have taken important steps to green the European economy and simultaneously promote competitiveness. The industrial strategy due to be adopted on March 10 will be one more significant policy initiative, following inter alia the Communication on the European Green Deal in December last year.

Still, some aspects are lacking in the draft industrial strategy leaked in January.

Helping bridge the gap between innovation and commercialisation of new green technologies is an important task for the EU. Co-funding large scale demonstration plants could be done to a larger extent also outside the sector covered by the Innovation Fund, finding inspiration in member state initiatives such as the Danish eco-innovation program MUDP and the German Umweltinnovationsprogramm. Supporting technologies for better recovery of critical metals is one of many possible such examples where EU coordination and financial support would provide benefits.

To facilitate large-scale demonstration, the envisaged changes in the environment and energy guidelines for state aid approval need to be implemented quickly. Chances of success in the transition to for example low-carbon steel production are higher with a “let many flowers bloom” strategy similar to how sea-based wind power has been encouraged through general EU guidelines for state aid, than by only supporting first-of-a-kind projects. This could be underlined in the text of the industrial strategy communication.

Improving resource efficiency can reduce negative environmental impact and increase productivity. The Commission could find inspiration for example in the German ProgRess strategies to improve resource efficiency. Industrial organisations´claims about gigantic future energy demand should be analysed critically. Yes, more renewable electricity will be needed for transport and industrial processes, but no energy source is without environmental impact.

Digitalisation and artificial intelligence can help reduce energy demand. The industrial strategy could better describe such links, for example in using digitalisation and machine learning to make energy intense industrial processes more efficient. Here, the European Union can play an important role by increasing funding for research and development, as well as in providing standards and incentives for harmonised databases. In addition, the environmental footprint of digitalisation and machine learning itself could be addressed, in a similar way as in the recent Communication on a Digital Europe and in the White Paper on AI. Data and knowledge based on EU initiatives such as the Reach legislation on chemicals could be better used to promote new business areas such as green chemistry, of course respecting commercial secrecy provisions.

Reducing consumption of energy-intensive materials (or in some cases slowing growth of consumption) should not be taboo. Such materials are of key importance for the economy and for our welfare, and can provide environmental benefits (better steel in cars can for example reduce fuel consumption), but in some cases the consumption can be reduced without welfare losses, providing environmental benefits. The over-use of concrete in construction is such an example. Substitution of fossil-based materials such as plastics with alternatives based on sustainable biomass is another important area that could be mentioned in the industrial strategy. Consumption also need to be addressed more broadly, a topic well highlighted by IEEP.

The Green Deal and the Sustainable Investment Plan will facilitate investments by the private sector in low-carbon transition. However, such financial support should not come without strings attached. That would be contrary to the well-established polluter pays principle. As argued in a recent paper by E3G, support to industry should be combined with a policy framework providing real incentives for industry to move and with product standards.

It is important to underline the role of small and medium-sized companies in the green transition. The Commission will publish a specific strategy on SME:s, but their role could also be more thoroughly described in the text of the industrial strategy. For example, suppliers to the car industry have a crucial role and a vision for the future should address their situation when electrification of transport will provide fundamental changes. The positive aspects of the envisaged “renovation wave” for SMEs in countries like Poland could also be highlighted and the link to the New Skills Agenda be underlined.

Finally, the external dimension of the industrial strategy is a key issue. Increasing European competitiveness is a key objective for the initiative. However, this does not excluded co-operation on for example innovation in the pre-commercial phase or joint large scale demonstration projects in some cases. For example, the European Union, Japan and South Korea have similar objectives when it comes to the circular economy and to de-carbonisation. A joint analysis of possible intensified cooperation does not need to be in conflict with European competitiveness, in particular when the complex global supply chains are taken into account. In addition, more attention should be put on international guidelines and agreements on reduced greenhouse gas emissions from energy intensive sectors.

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