EU closes deal on scaled-back clean tech ‘sovereignty fund’

Legislators from the Council of EU member states and the European Parliament reached agreement on Wednesday (7 February) on a scaled-back version of what was initially pitched as an EU sovereignty fund to support green technologies.

The Strategic Technologies for Europe Platform (STEP) will seek to “mobilise investments in the fields of digital and deep tech, cleantech and biotech, with the overall aim of strengthening the EU’s sovereignty and long-term competitiveness in critical technologies”.

The STEP platform was agreed by representatives of the European Parliament, the Council of EU member states, and the executive EU Commission during “trilogue” talks in the early morning hours of Wednesday, sealing a political agreement on the proposal.

“Through a mix of financial incentives and measures to facilitate the financing of projects, it will leverage funding in support of critical technologies under existing EU programmes and funds,” reads a statement issued by the Council.

Under STEP, a “Sovereignty Seal” will be awarded to projects contributing to Europe’s autonomy in manufacturing clean and digital technologies.

The initiative was initially pitched in 2022 by Commission President Ursula von der Leyen in reaction to the massive US cleantech subsidy programme, the Inflation Reduction Act.

“We want European industry to keep leading in the green transition. This is why I introduced the idea of a sovereignty fund,” von der Leyen said in a speech to Parliament on the eve of an EU leaders’ summit in December 2022.

Commission President: EU Sovereignty Fund will be proposed in summer

Ahead of Thursday’s (15 December) meeting of EU leaders, EU Commission President Ursula von der Leyen announced that a proposal for a European Sovereignty Fund to support European industry’s green and digital transition would be presented next summer.

No fresh money

But EU member states could not agree on fresh funding for the initiative, forcing the EU executive to delve into existing EU funds.

While France has backed the idea of a large fund financed by common European debt, other member states like Germany and the Netherlands argued that there was still plenty of unused cash in the EU’s €800 billion COVID-19 recovery fund.

During the negotiations, EU legislators also broadened the scope of the proposal to “critical technologies” such as deep and digital tech, cleantech, and biotech. To boost defence investment capacity, an additional €1.5 billion will be allocated to the European Defence Fund.

What remains is an online portal, the Strategic Technologies for Europe Platform (STEP), where EU member states can apply for fast-tracked procedures to finance STEP-related projects, including the possibility to co-finance these projects up to 100% – including those benefitting big companies.

Henrike Hahn, a Green MEP from Germany who was among the Parliament’s negotiators on the proposal, put up a brave face, saying the STEP initiative will bring Europe “one step further” in its effort to finance green industries.

“By introducing a new STEP quality seal and adapting existing funding programs, we are making it easier for regional and national authorities and the Commission to specifically identify projects that contribute to the EU’s economic independence and competitiveness,” she said in a statement.

However, she could not hide her disappointment with the lack of fresh money to reach those objectives.

“Green industrial policy investments at the European level are far from where they should be – they are still a drop in the ocean,” she said, blaming the outcome on “the refusal of some member states” including the “German finance minister,” Christian Lindner.

“Hesitation is not the right approach here. China does not wait until Europe has woken up,” she added.

Greens are not alone in decrying the outcome as insufficient.

“We were expected to get an EU fund to strategically invest in clean tech after the IRA, and what we get, basically, is a website,” said Simone Tagliapietra, a senior fellow at the Bruegel economic think tank in Brussels.

“EU member states have killed von der Leyen’s proposal, exposing the EU to a significant risk of single market fragmentation, as the only remaining option here is national subsidies, which only countries with fiscal space can provide. This will need to be revived and put at the core of the agenda after the elections,” Tagliapietra told Euractiv.

The predictable flop of Europe's green industrial policy

The mishap around the European Sovereignty Fund has exposed the fault lines in the EU’s approach to industrial policy. How to fill the gap – and compete on par with the US and China – will be a central theme for the 2024 European elections, writes Frédéric Simon.

[Edited by Zoran Radosavljevic]

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