The Clean Industrial Deal - A Step In The Right Direction

The European Commission launched the Clean Industrial Deal package on the 26^th of February. It contains a wide range of measures and announced legislative proposals that have a dual ambition – to maintain and support the green transition in the EU, while strengthening the competitiveness of industry. Both elements are important from the perspective of the Swedish business community. Continued ambitious and long-term climate ambitions create the conditions for Swedish companies, which are often at the forefront of this work, to benefit from previously implemented and planned investments.

The increased emphasis on competitiveness is also essential. Industry in the EU is facing increasingly fierce global competition, while being confronted with high energy costs and an increased burden in the form of several new regulations introduced during the previous Commission mandate. The Clean Industrial Deal will shape the recently started new EU policy cycle, and the fact that the industry’s ability to adapt and compete on the global stage isbeing put at the center is very positive.

Looking at the more concrete initiatives and legislative proposals included, the following observations can be made:

• The energy issue is at the forefront, both in terms of the need for lower energy prices and the transition of energy production. A new Affordable Energy Action Plan aims to stimulate investments in what is referred to as “clean energy”, which primarily means renewable energy. There is also a strong emphasis on proposals to improve the functioning of the energy market through enhanced infrastructure and increased interconnections between Member States.
• Increasing demand for EU-produced “clean products” is set to become a reality by introducing criteria for sustainability, resilience, and even an explicit “Made in Europe” label in both public and private procurement.
• Regarding financing, several proposals are presented on how public funding will be used to support renewable energy production, industrial decarbonization, and for the production of certain green technologies. This will be achieved through the mobilization of new funding by reallocating EU resources, expanding existing programs to cover these areas, and further loosening state aid rules to allow Member States to provide greater support for such initiatives.
• Circularity and access to strategic and critical raw materials are at the forefront. The EU will enable companies to join forces, or use the EU level to purchase raw materials on a larger scale on the global stage. A new Circular Economy Act, set to be introduced next year, will increase the conditions and objectives for increased efficiency in the use and recycling of materials.
• In the area of trade, the Commission intends to conclude new trade agreements in the form of so-called Clean Trade and Investment Partnerships to enhance diversification opportunities. At the same time, it will review and ensure the effectiveness of its own defensive trade instruments in an increasingly geopolitical and challenging global trade environment.
• Finally, in terms of skills and high-quality jobs, the Commission is launching several initiatives, including the Union of Skills.

The overall approach and direction of the Clean Industrial Deal is good — the fact that the focus is now on how various legislative proposals impact industrial competitiveness and what the industry needs to remain competitive and assert itself on the global stage is necessary. However, this does not mean that there is a simple truth about what these needs are or how long-term competitiveness is best stimulated.

• One of the major challenges in strengthening competitiveness is the high energy prices that European companies face compared to competitors in other parts of the world. This is a problem that cannot be solved quickly, and where the EU level actions can only to contribute parts of the solution. The fact that further initiatives are being taken to create shorter and more predictable permitting processes is positive. However, a significant responsibility for a well-functioning energy production system lies with each Member State.
• Greater technological neutrality is needed, where all fossil-free energy sources are needed to meet the goals of reducing carbon dioxide emissions. Additionally, robust electricity systems are essential — not only to provide predictability for businesses but also to create better conditions for investing in new production on market-based terms. In some cases, however, public intervention is necessary to share parts of the investment risk. In this regard, further guidance from the EU on how this can be done in compliance with state aid rules would be welcome.
• There is a strong belief that public investments will pave the way for competitive businesses. The Clean Industrial Deal introduces several new financing initiatives, further expanding the already complex landscape of support mechanisms that companies can apply for at the EU level. However, additional relaxations of state aid rules risk distorting competition even further, giving advantages to companies from countries that have both the financial muscles and the political will to leverage these support tools. A greater emphasis should have been placed on how market conditions can be improved to encourage more private investments and on the role that Member States must play in this regard.
• Competitiveness is not strengthened by increased protectionism. Nevertheless, proposals are being introduced that, in some respects, would close off our market from the rest of the world and, in practice, limit purchases to goods produced within the EU. While this is a trend we are seeing in other parts of the world as well, it is not good that the EU is reinforcing this development. It could lead to reduced competitiveness as businesses lose access to the most efficient production methods and result in higher prices for consumers.
• This initiative places a strong focus on industry, in particular traditional and energy-intensive sectors. While this is not inherently wrong, additional measures are needed to strengthen other parts of the economy, which are often closely linked to these industries. This is especially true for small and medium-sized enterprises (SMEs) and service companies.

There is still much to be desired from the Clean Industrial Deal, and it is by no means a complete solution to the EU’s competitiveness challenges. However, it is a vehicle that, for the most part, is moving in the right direction. Much remains to be done in terms of filling its various components with concrete content, which will be a key focus in the coming years.