Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

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.

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.

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.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u421983467f bb39 37d5862ca0d5 0 Ending Britain’s “Brief Encounter” with BrexitStefan Stern
u421983485 2 The Future of American Soft PowerJoseph S. Nye
u4219834676d582029 038f 486a 8c2b fe32db91c9b0 2 Trump Can’t Kill the Boom: Why the US Economy Will Roar Despite HimNouriel Roubini
u42198346fb0de2b847 0 How the Billionaire Boom Is Fueling Inequality—and Threatening DemocracyFernanda Balata and Sebastian Mang
u421983441e313714135 0 Why Europe Needs Its Own AI InfrastructureDiane Coyle

Most Popular Articles

startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer
u421983467 2a24 4c75 9482 03c99ea44770 3 Trump’s Trade War Tears North America Apart – Could Canada and Mexico Turn to Europe?Malcolm Fairbrother
u4219834676e2a479 85e9 435a bf3f 59c90bfe6225 3 Why Good Business Leaders Tune Out the Trump Noise and Stay FocusedStefan Stern
u42198346 4ba7 b898 27a9d72779f7 1 Confronting the Pandemic’s Toxic Political LegacyJan-Werner Müller
u4219834676574c9 df78 4d38 939b 929d7aea0c20 2 The End of Progess? The Dire Consequences of Trump’s ReturnJoseph Stiglitz

Eurofound advertisement

Ageing workforce
How are minimum wage levels changing in Europe?

In a new Eurofound Talks podcast episode, host Mary McCaughey speaks with Eurofound expert Carlos Vacas Soriano about recent changes to minimum wages in Europe and their implications.

Listeners can delve into the intricacies of Europe's minimum wage dynamics and the driving factors behind these shifts. The conversation also highlights the broader effects of minimum wage changes on income inequality and gender equality.

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Foundation for European Progressive Studies Advertisement

Spring Issues

The Spring issue of The Progressive Post is out!


Since President Trump’s inauguration, the US – hitherto the cornerstone of Western security – is destabilising the world order it helped to build. The US security umbrella is apparently closing on Europe, Ukraine finds itself less and less protected, and the traditional defender of free trade is now shutting the door to foreign goods, sending stock markets on a rollercoaster. How will the European Union respond to this dramatic landscape change? .


Among this issue’s highlights, we discuss European defence strategies, assess how the US president's recent announcements will impact international trade and explore the risks  and opportunities that algorithms pose for workers.


READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

KU Leuven advertisement

The Politics of Unpaid Work

This new book published by Oxford University Press presents the findings of the multiannual ERC research project “Researching Precariousness Across the Paid/Unpaid Work Continuum”,
led by Valeria Pulignano (KU Leuven), which are very important for the prospects of a more equal Europe.

Unpaid labour is no longer limited to the home or volunteer work. It infiltrates paid jobs, eroding rights and deepening inequality. From freelancers’ extra hours to care workers’ unpaid duties, it sustains precarity and fuels inequity. This book exposes the hidden forces behind unpaid labour and calls for systemic change to confront this pressing issue.

DOWNLOAD HERE FOR FREE

ETUI advertisement

HESA Magazine Cover

What kind of impact is artificial intelligence (AI) having, or likely to have, on the way we work and the conditions we work under? Discover the latest issue of HesaMag, the ETUI’s health and safety magazine, which considers this question from many angles.

DOWNLOAD HERE

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641