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Explained: the Green Deal Industrial Plan

Jingying Han, March 30, 2023

In February 2023, the European Commission presented its proposed Green Deal Industrial Plan, which looks to scale up climate transition in the European Union (EU) and follows the European Green Deal and REPowerEU.¹

As a follow-up in March, the European Commission delivered concrete regulatory proposals to support the plan. These included the Net Zero Industry Act and the Critical Raw Materials Act as well as electricity market reform and changes to state aid rules² on the funding side.

Why is it being proposed?

While the European Commission is looking to “secure the EU’s industrial lead in the fast-growing net-zero technology sector”,³ the plan is primarily to level the climate finance playing field following the passing of the Inflation Reduction Act (IRA) in the US and new subsidies to boost domestic clean-technology manufacturing in China.

What is the intent of the proposal?

The European Commission is focused on easing the regulatory framework and state aid rules to allow simplified and faster approvals for clean-technology projects and a simplified process for granting aid. The proposal also seeks to raise the aid ceiling and allow aid for less mature clean technology.⁴ The other two pillars of the proposal aim to enhance green skills and promote free trade to protect the critical raw materials supply chain.

What is the timeline?

In the EU leaders’ meeting on 23-24 March⁵, the EU Council gave the green light to the Green Deal Industrial Plan including the proposed Acts and reform. Once they are approved by the EU Parliament, the Acts will be adopted. The timeline for adoption is expected to be by the end of this year.

What is our take?

We welcome this much-touted announcement, although we are aware that industries need more reassurance on funding accessibility and ease of application as well as on the implementation speed of the plan.

The US IRA is preferred by many as the subsidies greatly reduce clean-technology production costs, which could attract an inflow of investments from large-scale European companies. However, the IRA is focused only on a manufacturing subsidy, while the Green Deal Industrial Plan aims to create a favorable regulatory and financial environment across the entire value chain of clean technologies – from manufacturing to demand.

 

1 https://www.euractiv.com/section/economy-jobs/news/eu-announces-own-green-industry-plan-in-global-subsidy-race/
2 Temporary Crisis and Transition Framework (europa.eu)
3 The Green Deal Industrial Plan (europa.eu)
4 https://ec.europa.eu/commission/presscorner/detail/en/ip_23_510
5 In U-turn, Germany backs swift adoption of EU power market reform – EURACTIV.com