The 53rd World Economic Forum meeting was held on 16-20 January 2023 in Davos, Switzerland. In addition to the economy, prominent issues such as the Russian-Ukrainian War, Covid-19 pandemic, energy crisis, climate change, migration problem and technological developments were discussed at the meeting, and European Union (EU) Commission President Ursula von der Leyen also made a speech. In her speech, Leyen emphasized that net-zero transformation will lead to industrial, economic, and geopolitical changes; in this transformation process, she announced the European Green Deal Industrial Plan, which they prepared with the vision of making Europe the center of clean technology and industrial innovation.[1]
The European Green Deal Industrial Plan is divided into four pillars.[2] The first pillar responds to sectors such as wind, solar energy, heat pumps, clean hydrogen and storage that are important for the achievement of the zero target, and how to prepare conveniently conditions and the environment. It is stated that the Net Zero Industry Act, which will be carried out in conjunction with the European Critical Raw Materials Act, will support the creation of convenient investment conditions and determine the main targets of European clean technology until 2030.
The second pillar of the plan is financing and state aid. It was emphasized that in order to make Europe attractive to the incentives of other countries, important projects should be financed more easily, and aid should be more accessible. The European Sovereignty Fund will be created to support the clean technology transition throughout the Union, and through this fund, it is aimed to increase the resources available for production-oriented research, innovation and strategic industrial projects that are key to achieving net zero.
The third pillar is the development of skills that can make the transition happen. In this context, it is intended to meet the need for sectoral talent and skilled workers in the development of technology.
The fourth pillar is the creation of open and fair trade for the benefit of everyone so that clean technology serves net zero globally. In this section, it is emphasized that international trade should be developed to create jobs and develop new products by meeting the need for the industry and reducing costs.
Essentially, the EU included the environmental issue in its policies by including the principle of “polluter pays” in the Single European Act signed in 1987; subsequently, it has been willing to effectively implement sustainable development, climate change and environmental policies both in EU Treaties and in institutional work. However, this plan, the general framework of which was announced in Davos, is very important in terms of coinciding with the period when the international order was redesigned with the Russian-Ukrainian War and the effects of the energy crisis were deeply felt in Europe. Because of the increasing energy costs in this region, industries; cheaper energy, sustainable energy security and more subsidies are trending towards attractive countries. In this perspective, China and USA stands out at the outset for European investors.
As it is known, China dominates the production and trade of most clean energy technologies, especially-free panels, electric vehicles, batteries, and mines. Almost half of the solar modules manufactured in China are exported mainly to Europe and the Asia-Pacific region, with the two regions purchasing 25% of electric vehicle batteries from China. In wind turbine components, 60% of global capacity is supplied from China.[3] These data show that the EU, which faces the heavy bill of its dependence on Russia in fossil fuels, is dependent on China to procure the products necessary for the realization of its green transformation plans. Therefore, the EU wants both to reduce this dependence on China and to prevent investments from shifting to China due to cheap energy and low labor costs.
On the other hand, on August 16, 2022, the Joe Biden administration passed the Inflation Reduction Act (IRA), which includes policies to combat climate change. This law aims to significantly reduce carbon emissions by 2030, while strengthening its green technology.[4] On the occasion of the IRA, it was decided to give tax relief and subsidies to those who develop green technology, especially the production of electric vehicles, solar panels and batteries produced in the USA.
Although this initiative of the USA is an important breakthrough in the fight against climate change in the global sense, it has been evaluated as a risk for the EU. The IRA has the potential to weaken EU industry. High energy costs in Europe and low subsidies compared to the US cause EU investors to turn to the US. Moreover, the fact that consumers can only benefit from this tax reduction when they purchase products of US origin, harms the EU market.
Indeed, the IRA has been a strategic move that could undermine the EU’s goal of global leadership. Because all green policies are quite important in terms of determining the position of the EU in the international arena.
The EU wants to take part in world developments as an active actor. Several academics, especially Ian Manners, have stated that the EU should act as a normative force to achieve this goal. Indeed, from the moment it was founded, the EU has been identified with certain norms: Peace and freedom in the post-World War II period; democracy, the rule of law and human rights norms during and after the cold war era, became the defining features of Europe and these were intended to be exported to other countries.
Presently, the EU wants to lead other countries in solving the crisis, which is a globally important issue, by adding the fight against climate change under the heading of sustainable development among the normative instruments that will strengthen its position in international politics.
In fact, the EU, which has not been remarkably successful in exporting values such as human rights, rule of law and democracy to other countries recently, is striving to increase its capacity to influence other countries by bringing climate change and sustainability norms to the forefront.
As can be understood, the European Green Deal Industrial Plan is extremely critical for the EU to increase its competitiveness with other countries, especially the USA and China, to have a say in the future economy dominated by clean technology, to become the center of green energy and to reduce the effects of the climate crisis. However, given that the 27 member EU has conflicts of interest among its own members, it will not be easy for the Union to achieve its ability to compete with China and the United States.
Due to the lack of equal power of its members, there may be an inequality between countries in terms of support for the European Green Deal Industrial Plan or in benefiting from incentives under the plan. Although it is desired to establish a sovereign fund in order to facilitate the green transition of all European countries, it is thought that some EU member states will abstain and that the EU Presidency Sweden, will avoid centralizing the economy. German Chancellor Olaf Scholz, for example, said that the EU has a budget of more than 200 billion euro in the post-pandemic recovery fund and that priority should be given to it.[5] In particular, countries with strong economies may prefer to advance bilateral relations to develop their own industries rather than allocate resources to this fund. Because France and Germany have decided to establish a working group to accelerate their cooperation in key sectors that will help decarbonize their industries.[6]
As a result, with the need for green production, the green economy has started to develop globally. This situation also paves the way for competition between states. The Union, which wants to remain in a competitive position in the face of the policies of China and the United States, wants to make a move to the European Green Deal Industrial Plan and to create an area where it can both take its share of this economy and lead other countries in the fight against climate change. However, there are various doubts about whether the plan will go beyond the intention and become feasible.
[1] “Davos 23: Special Address by Ursula von der Leyen, President of the European Commission”, World Economic Forum, https://www.weforum.org/agenda/2023/01/davos-23-special-address-by-ursula-von-der-leyen-president-of-the-european-commission/, (Date of Accession: 23.01.2023).
[2] Ibid.
[3] “Energy Technology Perspectives 2023”, International Energy Agency, https://www.iea.org/reports/energy-technology-perspectives-2023/executive-summary, (Date of Accession: 23.01.2023).
[4] “By The Numbers: The Inflation Reduction Act”, The White House, https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/15/by-the-numbers-the-inflation-reduction-act/, (Date of Accession: 23.01.2023).
[5] Jan Strupczewski-Andreas Rinke, “Draft Shows EU To Back New Funding For Green Industry, But Officials Urge Caution”, Reuters, https://www.reuters.com/business/sustainable-business/eu-leaders-back-new-funding-green-industry-feb-draft-2023-01-24/, (Date of Accession: 23.01.2023).
[6] “Joint Statement by Bruno Le Maire and Robert Habeck: “We Call for a Renewed Impetus in European Industrial Policy””, Ministère de l’Économie et des Finances, https://presse.economie.gouv.fr/22112022-joint-statement-by-bruno-le-maire-and-robert-habeck-we-call-for-a-renewed-impetus-in-european-industrial-policy/, (Date of Accession: 23.01.2023).
