Europe First! - Europe's counter to the IRA

Since the U.S. presented its green technology support package toward the end of last year, which has a pronounced focus on production in the domestic market, calls have been made for Europe to counter with a similar program. Numerous talks and attempts at mediation between the two industrial superpowers have taken place since then, but there seems to be no compromise so far. And so, next week, the EU Commission will present its own first draft to make Europe fit for the energy transition and net zero emissions by 2050.

According to German media outlet F.A.Z., Europe is apparently reacting with an equally protectionist approach as the U.S.: In the future, more production is to take place on the European market to make it possible for 40 percent of the key green technologies needed annually to achieve the climate targets to be produced in the EU by 2030 on a mandatory basis. In terms of individual technology sectors, it could mean that 85 percent of wind turbines and batteries, 60 percent of heat pumps, enough electrolysers for 50 percent of green hydrogen, and 40 percent of solar panels must come from domestic production.

With the program, the EU wants to prevent companies from relocating their production facilities to the U.S. to receive support from the IRA package. At the same time, it is intended to achieve energy security and prevent excessive dependence on China, to which companies have increasingly migrated in recent years. The solar industry in particular has become dangerously dependent on the Chinese in recent years, and there have been warnings of this not only since COVID-19 and the Russian war in Ukraine, in which China has positioned itself close to Russia.

Europe's energy security is a top priority for the EU Commission (Image: Pixabay).

What is piquant is that in addition to renewable energies, the paper also includes thoroughly questionable technologies such as nuclear power and CO2 capture and storage. This reflects the diversity of opinions from different European countries, e.g. France insisting on nuclear power, while Germany will finally shut down its last plants next month.

In addition to financial support in the form of various targeted government measures, the draft also revisits one of the major problems of recent years: permitting procedures are to be accelerated and legal action - e.g. by residents and environmental protection groupss - made more difficult.

The EU has already initiated first steps with its emergency measures, which are designed to accelerate the expansion of renewable energies. Further actions are likely to follow here independent of the Net Zero Industry Act. The leaked draft dates from late February and is not yet official. "Should the Commission come to the conclusion that the Union is not meeting the targets or risks not meeting them, it will initiate further measures without delay to close the gaps," WirtschaftsWoche quotes from the draft regulation.

Thus further changes are to be expected - depending on how the major geopolitical situation develops.