Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

How to promote green industry beyond subsidies

Patrick ten Brink and Luke Haywood 13th March 2023

The EU has more to offer green industry—a stronger regulatory framework and credible carbon pricing.

green industry,subsidies
Wound up: the rapid expansion of renewable energy is testament to the power of security of investment (Peter Adams Photography / shutterstock.com)

The great subsidy race for green industry has begun, with the European Union’s Green Deal Industrial Plan endeavouring to respond to the United States’ Inflation Reduction Act.

The leaked draft of the Net Zero Industry Act rightly highlights a need to plan better the necessary industrial transformation of the EU. It considers a host of measures aimed at promoting specific industries, including streamlined permits, access to public and private finance and priority for public procurement.

The reaction from some corners of business to this competitive scenario has been to call for more subsidies. Industry is urging an opening of the floodgates of public money on both sides of the Atlantic, to lure ‘clean’ technology companies.

So far, the EU has steered a broad path to rendering clean technologies competitive—renewables, heat pumps, green hydrogen and so on—compared with those tying us to consumption of fossil fuels. The European institutions have not only formulated ambitious climate targets but introduced regulations for industrial production across many sectors, product standards limiting energy consumption, labelling schemes to inform consumers and businesses and carbon pricing for important industries, as well as supporting the research and development of the new technologies.


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

This journey has not always been easy. Polluting industries have pushed hard against regulations, product standards and higher carbon prices.

But together these components of EU climate policy have created security of investment for a range of technologies key to rapid decarbonisation. The swift development of renewable energy is an iconic example of the success policy mixes can have in establishing investment security. And no doubt the success will continue, as moving to an entirely renewable-powered economy is a vision most Europeans share.

Array of tools

The current US administration shares the EU goal of environmentally friendly, decarbonised industry. The federal government does not however have the same array of tools to create a business model for clean technologies.

US powers to regulate interstate commerce and provide for clean air cannot replace the explicit mandates enshrined in the EU’s climate law. The aggressive focus on subsidies in America is not because this is considered the most efficient mechanism to embed green technologies: it is merely the most powerful tool the administration has at its disposal. The progressive, climate-aware forces in the US pushed hard for an ambitious Inflation Reduction Act as the only way to drive reduced industrial emissions—not to suck investments away from the EU.

The US focus on subsidies alone is, though, a gamble. As dirty technologies are not priced or regulated out of the market, there is a risk of a ‘business as usual’ landscape, with just expanded outcrops of clean production. In responding, the EU must not ignore the fact that part of the success of its industrial policy lies in its robust regulation and carbon pricing—alongside state aid.

Environmental and social standards

Worse still would be for the EU to react to the US subsidies by weakening or even removing other climate measures. Industry has a responsibility to reduce its emissions and relaxing this as a result of the IRA would be absurd. Yet deregulation is exactly what some industry bodies and their political voices are requesting. A race to the bottom on environmental standards would do no one a favour.

Providing subsidies for purportedly green technologies is only responsible if these technologies are effectively assessed. The EU must provide benchmarks and ensure that subsidised technologies are in line with its targets on climate, renewable energy, a circular economy and zero pollution. For example, the same voices calling for ‘technology neutrality’ are also urging massive subsidies for specific products—such as hydrogen—without regard for the environmental or climate consequences.

Indeed, further environmental and social standards should be applied to ensure taxpayers’ money does not contribute to inequality and environmental destruction. This immediately rules out dangerous and dirty nuclear technology, with its unsolved waste problem. Public support should take into account the special contribution made by socially just business: non-profit enterprises and alternative employment models.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

And subsidies must be used wisely—targeted, cost-effective and with clear conditions attached—to avoid taxpayers’ money substituting for due exercise of corporate responsibility. Public monies need to come with clear conditionalities.

Next to subsidies, the plan also tries to encourage faster permits.  The way forward should not be to waive environmental assessments but invest in local, regional and national capacity to carry out assessments and deliver permits on time. Capacities were cut in many countries following the 2008 financial crisis as part of austerity measures. It is vital to invest now in assessment and planning capacity across the EU.

Uneven development

Fear of losing competitiveness is also driven by the obsessive commitment of some EU member states to large net exports. Yet on a broader canvas concentration of clean industry in a few global regions could exacerbate uneven development and hamper other economies progressing towards their own ‘strategic autonomy’.

On the one hand, industrial clusters provide hubs of innovation, economies of scale and concentration of skills. On the other hand, the presence of clean industries across the globe reduces transport costs, creates stronger international political support and distributes economic gains more fairly.

The Green Deal Industry Plan acknowledges the importance of a skilled workforce for the transformation of our economies, and reskilling and increased training can offer a lot. But this effort should focus on the utilisation of ‘no-regret’ technologies while promoting gender equality and the inclusion of youth and excluded groups, such as the Roma.

Resilient future

The EU must resist calls from business to drop, delay or dilute regulations that could be the catalyst for innovation and create the industry needed for a resilient future. It should set clear and ambitious criteria for subsidies to make wise use of public funds, avoid supporting the status quo that has fuelled the climate crisis, and encourage rather than erode the responsibility of industry for mitigating emissions.

If the Green Deal Industry Plan adheres to these principles, the US and EU can together take a significant step towards more environmentally-friendly, climate-compatible industry across the globe. A truly comprehensive response would go even further and support an economic paradigm shift—away from short-term profit-maximisation towards industry that is responsible, competitive and sustainable for the long term.

Patrick ten Brink
Patrick ten Brink

Patrick ten Brink is secretary general of the European Environmental Bureau.

Luke Haywood
Luke Haywood

Luke Haywood is policy manager for climate and energy at the European Environmental Bureau, having worked at the German Institute for Economic Research in Berlin, the OECD in Paris and the Mercator Research Institute on Global Commons and Climate Change.

You are here: Home / Ecology / How to promote green industry beyond subsidies

Most Popular Posts

meritocracy The myth of meritocracy and the populist threatLisa Pelling
consultants,consultancies,McKinsey Consultants and the crisis of capitalismMariana Mazzucato and Rosie Collington
France,pension reform What’s driving the social crisis in FranceGuillaume Duval
earthquake,Turkey,Erdogan Turkey-Syria earthquake: scandal of being unpreparedDavid Rothery
European civil war,iron curtain,NATO,Ukraine,Gorbachev The new European civil warGuido Montani

Most Recent Posts

gas,IPCC Will this be the last European Gas Conference?Pascoe Sabido
water Confronting the global water crisisMariana Mazzucato, Ngozi Okonjo-Iweala, Johan Rockström and 1 more
Hungary,social media,women Hungary’s ‘propaganda machine’ attacks womenLucy Martirosyan
carbon removal,carbon farming,nature Environmental stewardship yes, ‘carbon farming’ noWijnand Stoefs
IRA,industrial policy,inflation reduction act The IRA and European industrial policyPaul Sweeney

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

Eurofound advertisement

#AskTheExpert webinar—Key ingredients for the future of work: job quality and gender equality

Eurofound’s head of information and communication, Mary McCaughey, its senior research manager, Agnès Parent-Thirion, and research manager, Jorge Cabrita, explore the findings from the recently published European Working Conditions Telephone Survey (EWCTS) in an #AskTheExpert webinar. This survey of more than 70,000 workers in 36 European countries provides a wide-ranging picture of job quality across countries, occupations, sectors and age groups and by gender in the context of the Covid-19 pandemic. It confirms persistent gender segregation in sectors, occupations and workplaces, indicating that we are a long way from the goals of equal opportunities for women and men at work and equal access to key decision-making positions in the workplace.


WATCH HERE

Foundation for European Progressive Studies Advertisement

Let’s end involuntary unemployment!

What is the best way to fight unemployment? We want to know your opinion, to understand better the potential of an EU-wide permanent programme for direct and guaranteed public-service employment.

In collaboration with Our Global Moment, Fondazione Pietro Nenni and other progressive organisations across Europe, we launched an EU-wide survey on the perception of unemployment and publicly funded jobs, exploring ways to bring innovation in public sector-led job creation.


TAKE THE SURVEY HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

The four transitions and the missing one

Europe is at a crossroads, painfully navigating four transitions (green, digital, economic and geopolitical) at once but missing the transformative and ambitious social transition it needs. In other words, if the EU is to withstand the storm, we do not have the luxury of abstaining from reflecting on its social foundations, of which intermittent democratic discontent is only one expression. It is against this background that the ETUI/ETUC publishes its annual flagship publication Benchmarking Working Europe 2023, with the support of more than 70 graphs and a special contribution from two guest editors, Professors Kalypso Nikolaidïs and Albena Azmanova.


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube