Launching the landmark EU Green Deal in December 2019, Ursula von der Leyen expressed Europe's Commitment to becoming the first carbon-neutral continent by 2050. In 2023, the EU is laying the groundwork for its green energy transition.
But Europe is not the only competitor in the so-called “clean-tech race.” Around the world, from the United States to China, governments are investing heavily in green tech, putting pressure on the EU to be competitive in this burgeoning global market. Green, renewable, or net-zero technologies better serve the planet, while attracting investment and stimulating economies.
There are questions in the EU not only about its competitiveness in the green-tech marketplace but also whether it will have the raw material and manufacturing capabilities to fulfil its energy transition. With several milestones now enshrined in law, including a 55 per cent carbon emission reduction by 2030 and the banning of vehicles with internal combustion engines by 2035, what is the EU doing now to ensure its position years down the line?
Report: The Top Issues to Watch in Europe for 2023
An exhaustive summary of 2023 forecasts within the energy and digital policy fields in the European region.
EU Unveiling Plans in 2023 to Reach Climate Targets
In 2023, the EU will propose a number of packages, regulations, or revisions to existing legislation aimed at turning climate and environmental challenges into opportunities for the bloc to reach its carbon neutrality targets. Some of those initiatives include the Critical Raw Materials Act and sustainable supply of materials, the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation protecting human and environmental health, and the Green Deal Industrial Plan (GDIP) enhancing the competitiveness of Europe’s net-zero industry.
Green Deal Industrial Plan
One of the larger developments to be aware of is the Green Deal Industrial Plan. Presented on February 1, the plan aims to put Europe at the forefront of the global net-zero industry by enhancing the Union’s competitiveness through increased funding, streamlined permitting, and more opportunities for green skills training. The Industrial Plan is composed of four main pillars:
A predictable and simplified regulatory environment
Faster access to funding
Open trade for resilient supply chains
Critical Raw Materials Act
Also aimed at boosting the EU’s clean-tech industry, the Critical Raw Materials Act proposes a framework to ensure the reliable supply of materials such as lithium and rare earth elements, crucial in manufacturing the new technologies needed for the energy transition. According to EU Issue Tracker Environment Policy Analyst Justine Renard, as it stands, “there are questions as to whether the EU will have the raw materials necessary to meet its energy targets without becoming dependent on a third country, or non-member state, for critical materials.”
For example, with a plan to ban the manufacture and sale of combustion engine cars by 2035, the demand for Lithium-ion batteries has been steadily on the rise since 2020 and is estimated to increase by at least 40 per cent annually until 2025. Right now, Europe only has one lithium mine, and is therefore dependent on importing the vast majority of its reserves from outside the bloc. The Union is particularly conscious of avoiding becoming reliant on China, which currently has a near-monopoly on manufacturing refined lithium and lithium-ion batteries worldwide.
Renard explains that the EU recognises its mistake in becoming dependent on Russian gas, and wants to avoid repeating this with essential raw materials in the future. “In the Critical Raw Materials Act, the Commission proposes a benchmark for how much of Europe’s raw materials should originate within its borders. It sets a limit for the amount of one material imported from a single third country,” adds Renard.
REACH and the Classification Labelling and Packaging Regulation
Dietrich Sinnaeve, the director of EMEA regulatory advocacy at 3M Belgium, explains that his company is, “carefully watching the proposed revision of REACH and the Classification Labelling and Packaging Regulation.” This legislation, particularly important for companies working within the chemical industry, aims to tackle soil, groundwater and crop pollution by controlling mobile substances. 2023 could see the list of hazardous chemicals in Europe expanded, resulting in compliance complications for companies that work with them.
In the Critical Raw Materials Act, the Commission proposes a benchmark for how much of Europe’s raw materials should originate within its borders. It sets a limit for the amount of one material imported from a single third country.Justine Renard, Policy Analyst, Environment
FiscalNote EU Issue Tracker
The Green Deal Industrial Plan and the Inflation Reduction Act
The EU is not the only power to invest in green tech and innovation. With governments across the world financing their energy transitions, it’s important for Europe to remain competitive within one of the fastest-growing global markets. In late 2022, President Joe Biden announced the Inflation Reduction Act (IRA), a $370 billion package aimed at boosting the U.S.’s green-tech industry, placing the country at the forefront of the global battle against climate change and reducing the energy costs for households and businesses across America. Since the IRA came into law, it has created more than 100,000 clean energy jobs and generated almost $90 billion in investments.
Meanwhile, renewable energy companies in Europe are struggling with slow permitting and are strangled with red tape. Around the same time as the IRA came into force, Denmark suspended all applications for offshore wind farms over concerns that they were non-compliant with EU law. The recently proposed GDIP, which focuses on a simplified regulatory environment and faster access to funding, is widely seen as a direct response to the IRA.
According to Sinnaeve, the IRA has made the U.S. an attractive market for companies to operate. He goes on to say that without a direct response from the EU, companies may be incentivised to scale back their operations in Europe in favour of transferring to the US. The GDIP aims to put Europe on a level playing field with its American counterparts in boosting its own clean-tech sector by offering incentives to enterprises and organisations operating within the field.
Green Industrial Policy: A Global Perspective on the EU Green Deal and US Inflation Reduction Act
As the world faces the challenges of climate change and global economic recovery, green industrial policy has emerged as a critical tool for promoting sustainable economic growth while reducing greenhouse gas emissions.
Although PFAS can be safely made and used, 3M sees an opportunity to lead in a rapidly evolving external regulatory landscape and will continue to innovate new solutions for customers.Dietrich Sinnaeve, Director of EMEA Regulatory Advocacy
What is the Impact on Organisations?
The Green Deal Industrial Plan presents a number of opportunities to access funding and fast-track projects which may have previously been stalled by red tape. “The impact on companies will be largely positive: additional funding will be created to boost the clean-tech industry, and organisations will benefit from a skilled workforce trained through new ‘Net-Zero Academies,’” says Renard. The same is true for the Critical Raw Materials act, which will likewise drastically increase the funding and permitting available to companies that work in the mining, processing, and recycling of elements.
Despite some of the new opportunities that may become available in 2023, regulations relating to the classification of chemicals, such as the expansion of REACH, may make compliance more difficult for manufacturing companies, potentially forcing them to withdraw from certain sectors or outsource some of their manufacturing to countries with less stringent regulations.
3M, for example, announced late last year that it would be leaving the PFAS market by 2025 based on careful consideration of the evolving external landscape, including accelerating regulatory trends as the European REACH PFAS group restriction and stakeholder expectations. “Although PFAS can be safely made and used, 3M sees an opportunity to lead in a rapidly evolving external regulatory landscape and will continue to innovate new solutions for customers,” says Sinnaeve.
With a proposed revision of REACH and the Classification, Labelling, and Packaging Regulation coming this year, more chemicals could be added to the list of hazardous substances, making it non-viable for companies to continue producing certain products.
Key Takeaways for the EU Green Deal in 2023
In 2023, the European Union may continue implementing various initiatives and regulations to support the Green Deal. Overall, the policy roadmap is expected to drive significant changes in the industrial landscape toward sustainability and decarbonization.
Companies may need to invest in renewable energy technologies or transition to low-carbon business models to comply with regulations and maintain competitiveness in the market. On the other hand, organisations that offer sustainable products and services may benefit from increased demand and support from EU policies.
Stay on Top of Developing and Upcoming EU Energy Policy with EU Issue Tracker
With so many new initiatives, regulations and revisions in the pipeline, it’s crucial that companies operating in the EU stay up-to-date on legislation that could affect them. Being prepared for changes within European legislation will allow you not only to remain compliant but also to take advantage of the numerous opportunities brought by the Green Deal. With FiscalNote’s EU Issue Tracker, you can stay on top of new EU regulatory developments that could impact your organisation and receive timely, concise updates and analysis prepared by experts in Brussels.
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