The new Green Deal Industrial Plan

As always, the devil is in the details and, as always, not all details are yet known. This article therefore aims to provide a general, brief and non-exhaustive overview of the Plan’s four pillars:

1. A predictable and simplified regulatory environment
2. Faster access to sufficient funding
3. Enhanced skills
4. Open trade for resilient supply chains

But first, let’s start with some geopolitical and geoeconomic context. Industrial policy is certainly en vogue again. The United States’ Inflation and Reduction Act will mobilise over USD 360bn (CHF 327bn) by 2032, a significant part of which will support the country’s green transition. China announced plans to invest USD 280bn (CHF 254bn) in clean technologies; Japan’s investment in its green transformation is around JPY 20tn (CHF 140bn). Canada, India and the United Kingdom also belong to the group of countries that recently announced similar plans. But what is the deal and what is the plan of the European Green Deal Industrial Plan which is expected to redirect around EUR 275bn (CHF 275bn) to support green industry?

Pillar 1: A predictable and simplified regulatory environment

This pillar centres around three proposals that seek to strengthen industrial competitiveness:

1. A Net-Zero Industry Act aims to simplify the regulatory environment for EU production of green technologies such as batteries, windmills, heat pumps, solar, electrolysers, carbon capture and storage technologies.
2. A Critical Raw Materials Act aims to secure the supply of raw materials critical to the manufacturing of green technologies.
3. A reform of the electricity market design aims to guarantee predictable and reasonably low energy costs.

These proposals, to be put forward by the European Commission this spring, are accompanied by increased development of the necessary infrastructure such as the Trans-European Networks for Energy (TEN-E) and Trans-European Transport Network (TEN-T).

Pillar 2: Faster access to sufficient funding

This pillar centres around funding at the Member State and the European Union level.

At the Member State level, the Plan initiates the Temporary Crisis and Transition Framework, which raises the state aid notification thresholds of the GBER (General Block Exemption Regulation) and expands the scope of the IPCEI regulation (Important Projects of Common European Interests). This effectively increases the options of Member States’ support to the net-zero industry through both subsidies and tax breaks. This relaxation of state aid rules is aimed at:

1. Simplification of aid for renewable energy deployments
2. Simplification of aid for decarbonising industrial processes
3. Enhanced investment support schemes for the production of strategic green technologies
4. Targeted aid for new production projects in strategic green value chains

At the European Union level, the Plan redirects funding from the following funds:

1. REPowerEU initiative which aims to reduce energy dependencies through energy savings, the diversification of energy suppliers and the accelerated roll-out of renewable energy
2. InvestEU programme which aims to catalyse private investment in priority areas
3. Innovation Fund which aims to support the development and first-of-a-kind deployment of green technologies and solutions

In addition, the Plan advocates for the creation of the new European Sovereignty Fund, to be established in Q3 2023. This fund is to further support strategic supply chains in the transition to a net-zero economy.

These initiatives are accompanied by increased focus on private funding efforts like the Capital Markets Union.