Europe will give €100 billion in short-term relief to clean-tech manufacturing in order to compete with China, as it unveiled today in its Clean Industrial Deal. The money comes at the same time as the US is actively seeking to harm its manufacturing sector and send jobs to China.
The EU’s Clean Industrial Deal is a new plan focused on advancing clean manufacturing and increasing efficiency for energy-intensive industries.
The European Commission advanced the deal today with the hope of easing Europe’s current energy difficulties and making its manufacturing sector more competitive with China’s.
The €100 billion (~$105 billion USD) from the plan will support several initiatives to improve Europe’s manufacturing and clean energy competitiveness, including acceleration of clean energy and electrification, energy efficiency measures, recycling and raw materials access, and education for clean jobs.
The hope is that this money, which will be drawn from several sources including existing funds and from member states, will spark additional private sector investment in the amounts of several additional hundreds of billions of Euros through the next decade.
Europe intends to implement a number of reforms to help act on this plan, including cutting red tape, using its scale as a single market in order to better negotiate for raw materials, and bolstering coordination between EU member states to promote quality green jobs. It says the deal will create 500,000 new jobs in Europe.
Overall, the EU expects the plan to save €130 billion annually on energy costs by 2030, largely by boosting domestic supply of clean energy.
European energy concerns drive this deal
These moves are important right now for Europe, as the bloc has experienced significant energy difficulties in recent years. Europe has long been reliant on supplies of methane gas from Russia, despite decades of urging from environmentalists and others. Russia has exploited this reliance to push Europe into accepting various misdeeds over the years, including stealing Crimea and shooting down a passenger plane, knowing that Europe’s addiction to its oil products leaves it in a compromised position.
All of this came to a head during Russia’s (second current) invasion of Ukraine in 2022, where Europe finally woke up and acted to reduce imports of Russian gas. However, since the bloc had not properly readied itself for this moment by building up its own domestic supply, this led energy prices to skyrocket in the short term, and today they remain higher than they were before the crisis started (though it turns out, cutting off Russian gas wasn’t as apocalyptic as some had thought it would be).
This, along with global inflation experienced by every country due to the COVID epidemic, has fueled popular resentment and social unrest in Europe – even counterintuitively leading some voters (and one EV company CEO) to support anti-climate, pro-Russian extremist parties.
But so does looming Chinese dominance in clean tech
It also comes in the context of a steep rise in Chinese clean-tech exports, particularly in the realm of electric vehicles. China recently became the world’s largest exporter of automobiles, an industry which has long been a cornerstone of Europe’s industrial base.
In response to this, and to increasing sales of Chinese EVs in Europe, the bloc recently implemented import tariffs on Chinese EVs, in an attempt to buy local industry time to transition.
But whether European industry will actually take that time to make the right choices, or whether it will continue to delay EV manufacturing and therefore lose the lead even further, remains a question. This is one of the reasons why there are better solutions than tariffs – like investment, which incidentally, the Clean Industrial Deal announced today provides.
And so, the Clean Industrial Deal is an important moment. It signals an additional commitment by Europe not just to try to compete with China – by actually investing in doing well, instead of just trying to put up barriers and sit on its laurels – but to acknowledge that the future needs to be clean and that the bloc is currently not doing enough to ensure that it is.
The US made a similar deal under President Biden
The United States undertook a similar effort under President Biden via the Inflation Reduction Act (IRA), which dedicated nearly $400 billion in funding for climate and energy-related programs, with a focus on bringing back American manufacturing of advanced products.
The IRA, along with Biden’s Bipartisan Infrastructure Law (BIL), were incredibly effective at bringing more manufacturing investment and green jobs to the US. In total, companies announced $211B of investment and 227K jobs in EV manufacturing alone since the IRA and BIL were passed. And the net effect of the Biden-Harris administration’s clean investments resulted in a savings of $250B and 200k lives per year.
…But republicans are trying to ruin it
…Or at least, those investments would have helped. Unfortunately for America and the world, the current occupier of the White House is convicted felon Donald Trump, who finally received more votes than his opponent on his third attempt (despite committing treason in 2021, for which there is a clear legal remedy).
Mr. Trump campaigned on ending support for US EV manufacturing, and his party has previously passed bills to this effect.
While he has only occupied the White House for a little more than a month now, Mr. Trump has already signaled several attempts to give back the environmental, efficiency and manufacturing gains seen under President Biden.
For example, the Department of Transportation signed a memo to increase your fuel costs by $23 billion, the EPA wants to clean the air by making it more dirty, and, perhaps surprisingly to some, Mr. Trump is working to increase costs of domestic energy production even for the oil industry via unwise tariffs – on top of the illegal funding freezes for EV programs and others. There is even an effort to harm American education, which will also reduce long-term competitiveness of America’s labor market (in contrast to the European plan, which boosts investment in education).
The effect of all this hostility towards manufacturing and energy progress is that companies have canceled billions of dollars in plans to build new manufacturing hubs in the US, seeking greener pastures. These cancellations have disproportionately hit republican districts harder than the rest.
But perhaps it shouldn’t be a surprise that an ignoramus who has famously sent manufacturing jobs to China in his own businesses is actively seeking to cut education and manufacturing investment here in America. All of this can only result in the US becoming less competitive in manufacturing in the long term – especially in the face of greater commitments from the rest of the globe in leaning up their act.
And Europe sees an opening
But that’s not just us saying this: Europe itself recognizes the US’ backwards move, and sees it as an opening. With the US floundering on manufacturing, Europe knows that it has a chance to gain prominence now that one of its global competitors seems ready to take itself out of the game.
“The fact that the US is now moving away from the green agenda… does not mean that we would do the same. The opposite. It means that we need to step forward,” EU energy commissioner Dan Jorgensen said today, as quoted by DW.
And, after a hotly contested German election this week, the leader of the winning CDU said Europe should “achieve independence” from the United States.
China, too, is ready to take advantage of the US’ missteps. It’s looking to throw its weight around against countries (including those in Europe) who would erect trade barriers to EV growth, and shows no sign of relenting on EV development. And since no serious person thinks the future of the auto industry is anything but electric, or that energy won’t become more renewable as time goes on, those who stall on the way there will only be left in the dust of those who carry on.
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