4 February 2023

European Union unveils its ‘Green Deal Industrial Plan’: What does it entail?

GS-3: Conservation, environmental pollution and degradation, environmental impact assessment.

The European Union has unveiled the "Green Deal Industrial Plan" on February 1^st to support and grow its green industry. The plan aims to simplify regulations and offer subsidies. 

This comes after the US announced its Inflation Reduction Act (IRA), which offers billions of dollars in tax cuts for clean energy and climate change programs with incentives for US-based manufacturing. 

The plan will be discussed by EU leaders at a summit next week and must be approved by the 27 national governments to be implemented. The president of the European Commission said Europe is determined to lead the clean tech revolution.

European Green Deal

• The European Green Deal, introduced in December 2019, aims to make Europe the world's first climate-neutral continent by 2050. 

• To achieve this goal, the European Climate Law sets a binding target of reducing greenhouse gas emissions by 55% by 2030, compared to 1990 levels. 

• The European Green Deal Industrial Plan, announced in 2023, focuses on investing in clean technologies to strengthen the EU's competitiveness in the transition to a net-zero economy.

• The plan was created in response to the European Council's request for proposals to improve investment conditions and ensure the EU's resilience and competitiveness.

Green Deal Industrial Plan

• The European Commission website states that the proposed "Green Deal Industrial Plan" aims to simplify regulations, provide quicker access to funding, boost skills, and improve the EU's trade network.

Simpler regulatory framework

• The plan intends to create a "Net-Zero Industry Act" to simplify regulations and expedite permit approvalfor green projects, such as renewable energy, carbon capture, and renewable hydrogen production facilities. 
• In addition, it includes a "Critical Raw Materials Act" to secure access to essential materials, like rare earths, for the development of net-zero technology.

Providing faster access to funds

• The proposal loosens state aid rules to support investment in clean energy projects by the 27 EU governments. 
• It allows countries to access existing EU funds, rather than requiring countries with limited financial resources to provide subsidies. 
• The proposal does not require new funding and aims to direct €250 billionfrom existing EU funds of around €800 billion to support the green industry. 
• There is also a future plan to establish a "European Sovereignty Fund" to address investment needs in a structured manner.

Enhancing skills

• The plan aims to create "Net-Zero Industry Academies" that will offer up-skilling and re-skilling programs in strategic industries. 
• The European Commission's website estimates that 30 to 40% of current jobs may be impacted by the green transition, so the plan emphasizes the development of skills for high-quality, well-paying jobs.

Improving the trade network

• The plan highlights the significance of open trade and aims to further expand the EU's network of Free Trade Agreements and other forms of cooperation with partners to support the green transition. 
• The European Commission intends to establish trade agreements for raw materials and clean technology with like-minded partners.

Counter to the USA’s Inflation Reduction Act (IRA)

• The EU announces its "Green Deal Industrial Plan" in response to the US' Inflation Reduction Act (IRA), which offers huge tax cuts and incentives for clean energy and climate change programs. 
• EU leaders expressed concerns over the IRA's "discriminatory" provisions that could put European companies at a disadvantage and attract them to the US. 
• The EU plan provides subsidies to sustainable companies and has drawn mixed reactions, with some praising the bloc's recognition of Europe's competitiveness issues and others fearing a global subsidy war. 

Concern

• Wide-ranging government support may not always be effective and may lead to wasted funds if projects and companies fail.

[Ref- IE]

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