EU’s net zero plans will fail without more money, warn industry chiefs

EU plans to boost clean technology industries and reduce the bloc’s reliance on China will fail unless they are backed up with more money, industry executives have warned.

“We simply don’t have enough factories and infrastructure today to build all the wind power that Europe wants,” said Giles Dickson, chief executive of WindEurope.

The business group, which represents the wind energy sector, estimates €9bn is needed just to build the port infrastructure required to meet targets for offshore wind, with the private sector unlikely to meet the full cost.

Jules Besnainou, executive director of the Cleantech for Europe initiative, said the EU’s proposed Net Zero Industry Act, announced on Thursday, “falls short of the clarity and funding associated with the [US] Inflation Reduction Act” — a $369bn package of tax credits and subsidies aimed at prompting a clean energy boom in the US. Washington’s initiative has tempted several European companies to move across the Atlantic.

Brussels’ response to the IRA has involved loosening subsidy rules to keep companies in the region. It also wants to curb its dependence on China for much of its green industry supply chain and create jobs domestically.

This week Volkswagen, Europe’s largest car manufacturer by volume, said it planned to increase investment in China and build electric vehicle factories in the US and Canada.

The Net Zero Industry Act sets out measures to speed up the permits process and boost power grid infrastructure and includes domestic production targets for eight industries, including solar, wind, batteries and electrolysers.

The act aims to ensure 40 per cent of Europe’s annual clean technology needs should be met by domestic production by 2030.

Companies bidding for public tenders or subsidies to generate power would have to source 40 per cent of their equipment from EU factories under the proposals. They would also be more likely to miss out on contracts if they used suppliers from third countries that dominated a particular supply chain, as China does for solar power.

The announcement of the plan was delayed by two days while EU officials negotiated over the targets and industries included in its scope.

“If we want to get to climate neutrality as we planned . . . use all the opportunities this industrial revolution is throwing at us and ward off the challenges . . . we will need a massive scale-up of clean-tech manufacturing,” Frans Timmermans, the EU’s climate commissioner, said on Thursday.

The European Commission estimates the EU will need €400bn of investment a year to decarbonise and meet its target of net zero emissions by 2050.

Markus Beyrer, director-general of BusinessEurope, the EU employers’ group, said limiting the focus to a number of sectors could “handicap” that effort.

However, he welcomed the plan to speed up the permits process. “Europe is often too slow and too bureaucratic on all levels of planning, expanding, building and implementing industrial projects compared to our main competitors.”

One energy company executive said the “buy European” provisions would increase prices and decrease quality. The person, speaking on condition of anonymity, predicted a 30 per cent price rise for solar panels, saying: “Chinese products are not just cheaper, they are better.”

The act was announced alongside proposed legislation to secure supplies of critical raw materials such as lithium, rare earths and gallium, a critical material for semiconductors. These include targets to source 15 per cent of the metals from recycling old batteries and spare parts.

Timmermans said the EU would “have to follow up with more new joint funding” and that proposals for a “sovereignty fund”, announced by commission president Ursula von der Leyen in September, would be unveiled in May or June.

Member states must approve the fund as well as the new legislation, but Germany and the Netherlands object to the idea of the EU borrowing money to create it.