Europe’s re-engagement with industrial policy needs to address its social as well as environmental dimensions.
In the heartlands of the European Union, where the agrarian rhythm has long defined the landscape, a wave of discontent is sweeping across farms and fields. From Warsaw to Brussels, farmers are decrying their poor compensation, feeling burdened by taxes and grappling with competition from overseas, all under stringent EU green regulations. The European Green Deal aims to reduce carbon-dioxide emissions by 55 per cent by 2030 and ultimately achieve climate neutrality by 2050. Directives on nitrates, water and habitats, as well as pesticides regulations, have long been decried as EU ‘green tape’.
The metallurgic heart of Europe is however also implicated in the green transition. In February 2023, the European Commission trumpeted a massive ‘Green Deal Industrial Plan for the Net Zero Age’ (GDIP). Via ‘reshoring’ to Europe manufacturing capacity in energy-intensive and strategic sectors from China, the United States and emerging markets, the GDIP aims to set the EU on the path to climate neutrality and enable Brussels to lead the way globally in the ‘net zero’ industrial age. Yet doing so inevitably requires the phasing out of heavily polluting sectors, including the coalmining on which Europe’s metallurgical industries have traditionally depended.
This shift towards green industrial policies is part of a broader trend across western economies. In 2019, France and Germany issued a joint manifesto for an ambitious European industrial strategy. In 2022, the US unrolled the Inflation Reduction Act, a $400 billion plan to boost growth and counter China’s dominance in clean energy. The GDIP lacks though the necessary ambition and efficacy—and could imply a return to discredited neoliberal recipes.
‘Washington consensus’
In the wake of 1970s ‘stagflation’ (stagnation plus inflation), the ‘Washington consensus’ came to champion a limited role for government intervention, emphasising open national current and capital accounts as drivers of swift development. Industrial policies were viewed as outdated and ineffective dirigisme and politicians were advised to take a backseat: if firms, driven themselves by market forces, enhanced efficiency and gained a competitive edge, the overall ecosystem of enterprises would benefit. In the 1990s the European ‘single market’ saw the ‘liberalisation’ of protected sectors and the privatisation of state-owned enterprises, turning the state into a market regulator rather than a producer of public goods.
Yet the ‘permacrisis’—one crisis seamlessly following another, creating a pervasive sense of insecurity over Europe—has chipped away at governments’ unwavering confidence in the singular capacity of private enterprise and highly interdependent supply chains to propel economic development. Industrial policy is experiencing a resurgence, akin to entering a second golden age.
Europe’s green industrial turn stands however on a precarious footing. The benefits of re-industrialisation will be uneven: those regions relying heavily on mining and metallurgy and unable to diversify away risk being left behind. Production sites play a crucial role in the welfare of nations and governments lacking resources may not be able to buffer this shock while remaining fiscally stable.
Closing coalmines
As a member state with significant reliance on coal-based energy, Poland must align with the EU’s climate goals while ensuring a just transition for its workforce, within the bounds of the union’s fiscal architecture. The Polish economy is heavily dependent on the metallurgical industry, 74 per cent of whose energy comes from coal (domestic and imported) while only 15 per cent comes from renewable sources. Over the last 30 years, Poland has closed two-thirds of its mines, reducing the number of jobs in the sector from 300,000 to 80,000, according to miners’ unions. A full departure from coal could potentially result in thousands more workers being unemployed by 2030.
In Katowice, capital of the Silesian voivodeship, pockets of poverty have arisen. In areas where mining was previously the main source of income and alternative employment options are limited, miners are worrying. This concern is understandable: Europe provides a multitude of examples of poorly managed transitions over past decades. The geography of polluting industries across Europe tells the story of stratified socio-economic and environmental inequalities and of ‘left behind’ places.
Even for a member state such as Germany, with greater fiscal room for manoeuvre and relatively recent experience of such industrial shifts, challenges remain. Germany is the world’s sixth-largest carbon emitter, the largest consumer of coal in Europe and the largest global producer of lignite. In the former West Germany, the decline of hard coalmining led to the loss of approximately 350,000 jobs between 1960 and 2000, with the closure of the last mine in 2018. The Ruhr region continues to grapple with high unemployment, earning the label of Germany’s ‘poorhouse’. In Lusatia, a region southeast of Berlin, decades of mining have left behind vast depressions in the ground and, now that coal production is decreasing, jobs are in steep decline.
Glaring absence
The absence of a strong employment strategy is glaring. Skills shortages threaten the sustained upscaling of delivery of heat pumps, solar and wind technologies, while labour shortages reflect a crisis of low-quality jobs. If the labour force does not include the necessary numbers of workers with the requisite skills to meet increased labour demand, negative pressures may follow in the wider economy.
Considering the speed of evolution of green and digital technologies, existing skill-development initiatives may struggle to keep up with the demands of labour markets, leaving current as well as future workers unprepared or under-prepared for emerging roles. Adding to the complexity is that the demand for specific skills may fluctuate based on the trajectory of technological adoption.
This skills gap will increase as the GDIP phases out jobs with a heavy carbon footprint. As older manufacturing methods become obsolete, jobs centred on these outdated processes are likely to dwindle. The GDIP will inevitably create winners and losers, especially in the short term.
Poignant reminder
The gilets jaunes movement in France serves as a poignant reminder that strategies solely focused on discouraging the use of fossil fuels and increasing carbon prices for consumers can encounter strong resistance, undermining the overarching goals of sustainability and climate transition. Farmers, mine workers and many others threatened by the social changes Europe is facing are rallying and turning towards climate-denial parties or other political forces which fight to relax green rules. Inadequate handling of class dynamics and failure to garner backing from trade unions and civil society have historically undermined industrial-policy efforts.
The lack of adequate mechanisms to handle the implications of the green industrial turn may increase disillusionment with European integration. Radical-right parties have found fertile ground since the eurozone crisis and looming unemployment, Euroscepticism and patchy management of the green transition are a tinderbox awaiting a spark.
The ousted Law and Justice prime minister, Mateusz Morawiecki, has harshly opposed the phase-out of Poland’s mines. Alternative für Deutschland did well enough in the 2017 federal election to become the third-largest party in the Bundestag, drawing some of its most ardent support from the former East Germany, and becoming the second strongest party across the region. In Lusatia, where the prospect of thousands of job losses from the coal industry looms large, the AfD’s climate scepticism resonates more with voters than the government’s promises of support for the transition away from fossil fuels.
Only by addressing the concerns of current and future ‘left behind’ regions and workers can we successfully achieve the lofty but vital ambitions of the Green Deal and Europe’s associated industrial plan.
This is based on a chapter by the authors in B Vanhercke, S Sabato and S Spasova (eds), Social policy in the EU: state of play 2022 / Bilan social de l’Union européene 2022 (ETUI and OSE, 2023). It is part of our series on a progressive ‘manifesto’ for the European Parliament elections.
Tommaso Grossi (t.grossi@epc.eu) is a policy analyst at the European Policy Centre. He focuses on employment policy and the future of work, economic governance and the just transition.
Laura Rayner is a senior policy analyst at the European Policy Centre, focused on economic governance, the green and digital transitions, social protection and of a wellbeing economy in Europe.