Here’s Brussels’ secret weapon to save the industry

On Wednesday, the European Commission published an extensive presentation on the new Industrial Accelerator Act. Its goal is to strengthen the Union’s industrial base, reduce strategic dependencies and speed up emission reductions in energy-intensive sectors.

According to the Commission, geopolitical tensions and intensifying competition have made EU industry vulnerable. At the same time, energy-intensive sectors such as steel, cement, chemical industry and aluminum have lost market share and are struggling with high energy costs and investment needs. In many sectors, a significant part of the announced low-carbon projects has also remained unrealized.

The Commission’s goal is to reverse the downward trend in industry and increase the share of manufacturing in the EU’s gross domestic product from the current 14.3 percent to 20 percent by 2035. The goal is pursued in three main ways: by speeding up permit processes, creating demand for low-carbon European products, and directing foreign investments so that they bring jobs, technology and value chains to the EU.

Made in EU

A key part of the bill is the extension of the European requirements (Made in EU) in public procurement to certain strategic sectors, such as battery, solar panel, wind, heat pump and hydrogen technologies.

In addition to procurement, the European requirement also applies to public support programs.

According to the Commission’s reasoning, the requirements of the regulation are not applied as a uniform “European content” to all technologies, but are tailored to the structure, maturity and dependencies of each sector. In this way, the EU can increase European production where the impact is greatest and most realistic.

In public procurement and public support, both low-carbon and European requirements apply to cement and aluminum.

In net zero technologies, European requirements would apply to batteries, battery energy storage systems (BESS), solar electricity, heat pumps and wind power, as well as nuclear technology in certain public procurements, auctions and support systems.

European rules would also apply to electric vehicles and their components.

On the other hand, there is no European requirement for steel used in the automotive industry and construction; low carbon requirements would apply to them.

According to the Commission, the value chain of each sector has been thoroughly analyzed to determine where the EU has strategic dependencies and structural challenges.

The commission says the aim is to prevent market distortions and reduce dependence on countries that dominate global production chains.

However, the Commission’s presentation promises to offer equal treatment to non-EU countries that give EU companies access to their own markets.

The Confederation of Business Head of the Brussels office Ilari Kallion according to the European requirements for public procurement, there is a risk that they distort competition and weaken the functionality of the market.

“There has been feedback from companies and member associations that this requires an extremely accurate assessment of how this regulation treats different industries specifically in Finland,” says Kallio.

“Inevitably, there are winners and losers among companies,” he continues.

According to Kallio, it is still too early to say which side Finnish industries will be on in the end.

Industrial accelerators

In the IAA, the Commission proposes that so-called industrial acceleration areas be created in the EU, where companies can get accelerated and digital permit procedures from one stop and with a maximum processing time of 18 months. According to the Commission, this could significantly speed up investments and reduce the administrative burden on companies.

According to the Commission, Member States should designate areas for industrial acceleration to create strategic manufacturing clusters. Projects located in these areas would benefit not only from faster permits, but also from better access to infrastructure, financing and knowledge ecosystems.

China to be disciplined

“How can we justify the green transition to citizens if 100 percent of the batteries are manufactured in China?” asked the Vice President of the Commission and Commissioner for Industry Stéphane Séjourné while introducing the industrial acceleration bill on Wednesday.

The regulation contains new conditions for large foreign investments. It means that projects worth more than 100 million euros must meet the requirements that ensure the transfer of know-how and the location of production in the EU.

The new terms would apply to countries that control more than 40 percent of global capacity in electric vehicles, batteries, solar technology and critical raw materials. Thus, the regulation would specifically apply to China.

These countries must meet certain conditions for EU investments of more than 100 million euros. They include European majority ownership, technology transfer, integration into EU value chains and job creation.

The Commission considers this reform necessary so that the Union does not become “just a market area”, but investments support the Union’s growth and jobs.

The Commission’s promise

The Commission admits that the IAA entity may bring net economic costs in the short term, but in the long term the Commission believes that the reform will strengthen the EU’s industrial competitiveness, jobs and financial security.

The Commission estimates that the proposed model could produce a net effect of eight billion euros by 2030.

The Industrial Acceleration Regulation will be discussed next in the Council of Member States and the European Parliament.