How regulatory stability, enhanced coordination and joint funding are crucial to transform European Industry

The transition towards a thriving green industry in Europe is a top priority of the S&D group. We believe that this transition will have to be based on a true European vision, founded upon regulatory stability and joint financing. 

Laura Ballarín, Mohammed Chahim, Matthias Ecke, Raphaël Glucksmann are Members of the European Parliament from Spain, the Netherlands, Germany and France respectivey, and members of the Socialist and Democrats group.

That is why we are calling for a Industrial Transition Fund based on the structure of the RRF in order to increase EU’s investment capacity to at least €200 billion a year for the coming 5 years. Securing a strong European industrial base with quality jobs is not optional.

The climate emergency, the fourth industrial revolution and the geopolitical context place European industry at a crossroads. It is imperative that we respond to these challenges with the same courage and determination that led to the creation of the European Coal and Steel Community.

It is essential to work on an integrated European industrial vision in which EU Member States work together instead of having 27 industrial policies and financing strategies that could lead to direct competition against each other and a weakening of our single market. 

The surge of effective industrial policies in China and the USA, the COVID-19 crisis and the Russian aggression to Ukraine have reinforced the need for Europe to reduce its dependencies and have made the need to secure strategic autonomy a key factor in the industrial transition. 

While the EU has solid energy and climate policies in place with the European Green Deal as its basis, there are still big steps to be made regarding harmonised industrial planning and financing.

Regulatory stability

Regulatory certainty and political stability are crucial elements that can help our productive sectors in the path we have agreed upon during this legislative term (2019-2024). A predictable framework will attract investments by de-risking in new technologies and facilitate their scaling up.

The competitiveness of the EU and the Green Deal go hand in hand. Now it is time to flesh out the ambitions of the European Green Deal and fully exploit the potential it has to spur our economies. This transformation will enable: 

• reducing the EU´s greenhouse gas emissions to meet our and global climate targets, 
• showing the rest of the world the way in which prosperity and a sustainable economy enable one another; and
• stimulation of European companies to become leaders of future technologies.

The boost of sustainable technologies, such as the rapid deployment of wind, solar and electric cars, by the two other biggest economic blocs dissipates any doubts about their potential. This is not the time to open shallow ´cultural wars´ for short-term electoral gains, it is the time to build Europe´s future competitiveness around green technologies. 

This next mandate will require agreeing upon a 2040 climate target that continues the emissions´ reduction trajectory set under the Fit for 55 Package. This comes with a higher share of renewables in the EU energy mix, which will be crucial to decrease prices and increase our strategic autonomy, moving away from fossil fuels. Any deviation from that trajectory could lead to higher insecurity for our industry and influence their green investment decisions. 

The Green Deal should serve as the basis to build this European industrial policy, which should include overarching vision and planning. The existing Net-Zero Industry Act is a good first step but does not offer enough focus, geographical planning, labour market policy nor funding to really make the difference. This gap needs to be filled.

Let’s talk about the money

Even with all the regulatory stability in the world and a cohesive legislative framework in place, there is a need for more means. Our green industry has trouble competing with Chinese and American industry receiving broad financial support from their governments. Public funds are necessary to trigger private investments. 

It is estimated that investments into sustainable projects by both the private and the public sector could require around 650 B euro per year in the EU. It goes without saying that the investments of companies in sustainable business models is imperative. 

However, the EU’s support is essential and we already have an extensive toolbox of funding possibilities through the Innovation Fund, Horizon Europe, Next Generation EU, InvestEU among others. But more is necessary to meet our objectives and reap the economic benefits of the transition for EU businesses. This means leading instead of following.

The flexibilisation of State Aid rules, under the Temporary Crisis and Transition Framework, is creating a misbalance between Member States, based on their fiscal capacity. We must safeguard a level playing field between Member States or the Single Market will be fragmented undermining the cornerstone of the European project.

Moreover, our industries’ ecosystems go beyond borders of a single member state. Strengthening a part while ignoring others does not necessarily lead to more resilience, let alone improves competitiveness.

The practices around fiscal state aid and unfair tax competition should also be discussed in this context of level playing field. The ongoing work to complete the Capital Markets Union must continue as this will enable European companies a much better access to financing. The recently agreed-upon Economic Governance Framework has not removed the financial constraints of many member states to engage in necessary green spending.

A common budgetary instrument, consisted of ´fresh money´ will be crucial to revert the current situation. It will be necessary to design a methodology for an efficient and fair allocation, as well as strong green and social conditionalities. We can build on the model created by the Recovery and Resilience Facility.

This will not be an easy task but Europe cannot lose this opportunity to work towards the competitiveness of the future whilst creating quality jobs and de-risking our economies. The price to pay for not taking this necessary action would be much higher.

That is why the next Commission should work on an Industrial Transition Fund guided by one clear European industrial vision.

This clear vision, jointly with sufficient resources, will enable our industry to undergo these transformations and to remain the true engine of European integration, prosperity and wellbeing.