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EU State of the Union speech boosts Green Deal

Author: ICAEW Insights

Published: 22 Sep 2023

President of EU Commission cites extreme weather “right across Union” as the imperative to act on climate change, blasts China’s state subsidies for EVs, and makes the case for EU enlargement.

Outbreaks of extreme weather in Europe have heightened the importance of pursuing the EU Green Deal, according to European Commission President Ursula von der Leyen.

In her 13 September State of the Union address to the European Parliament, von der Leyen stressed that the past summer – the EU’s hottest on record – provided a “stark reminder” of the Green Deal’s aim to answer the call of history upon its launch four years ago.

As well as being born from a necessity to protect the environment, she said, the Green Deal was conceived as a means of preserving the EU’s long-term prosperity – merging the climate and economic agendas and setting a “clear sense of direction” for R&D and investment.

For von der Leyen, that growth strategy is already delivering results: “In the past five years, the number of clean steel factories in the EU has grown from zero to 38. We are now attracting more investment in clean hydrogen than the US and China together.”

To build on those achievements, the Commission will this month begin a series of regular Clean Transition Dialogues with industry sectors, supporting their efforts to decarbonise corporate business models. Alongside those talks, it will work closely with industry partners and member states to devise a new European Wind Power Package, with the goal of fast-tracking permits for the next generation of EU wind farms.

‘De-risk, not decouple’

Striving for a fair and just transition, von der Leyen said, requires a “fair journey for all those impacted,” based on decent jobs and a solemn promise that no one will be left behind. However, principles of fair competition have been sidelined amid the rising influence of China, she warned.

“We have not forgotten how China’s unfair trade practices affected our solar industry. Many young businesses were pushed out by heavily subsidised Chinese competitors. Pioneering companies had to file for bankruptcy. Promising talents went searching for fortune abroad.”

Von der Leyen said it must be “clear eyed” about the risks it faces, particularly in relation to electric vehicles – a sector flooded with Chinese models at prices kept artificially low by “huge” state subsidies that are “distorting” the EU market.

The Commission has launched an anti-subsidy investigation into electric vehicles coming from China, although the probe will not take a hostile stance. “We must defend ourselves against unfair practices,” von der Leyen said. “But equally, it is vital to keep open lines of communication and dialogue with China, because there are also topics where we can – and have to – cooperate. De-risk, not decouple: this will be my approach with the Chinese leadership at the EU-China Summit later this year.”

Capacity to cope

Von der Leyen stressed that labour and skills shortages and making life easier for European companies are two of the most urgent economic challenges for the coming year.

Although the EU is close to full employment – defying COVID-era predictions of a 1930s-style jobs crisis – labour and skills shortages are reaching record levels. “Instead of millions of people looking for jobs, millions of jobs are looking for people.” Meanwhile, eight million young Europeans are not currently in education, employment or training, presenting “one of the most significant bottlenecks” for the EU’s competitiveness.

Given the scale of that challenge, the Commission will increasingly seek the counsel of the EU’s Social Partners – bodies representing the interests of employees and employers across the continent. To tie in with next year’s Belgian Presidency of the EU, von der Leyen revealed, the Commission will convene a Social Partners Summit at Château de Val-Duchesse: the birthplace, after the Second World War, of European social dialogue.

Turning to ease of doing business – a topic on which the Commission has already made headway with its recently announced SME Relief package – von der Leyen noted: “Small companies do not have the capacity to cope with complex administration – or are held back by lengthy processes. This often means they do less with the time they have, and miss out on opportunities to grow.”

As such, by the end of this year the Commission will appoint a special EU SME Envoy, who will gather information on small businesses’ everyday challenges and report directly to von der Leyen. In parallel, an independent board will conduct a competitiveness check on each piece of new legislation. But before that, in October, the Commission will make its first legislative proposals towards cutting companies’ reporting obligations at EU level by 25%.

“Let’s be frank,” von der Leyen told MEPs, “this will not be easy. And we will need your support, because this is a common endeavour for all European institutions. So, we also have to work with member states to match the 25% [reduction] at national level.”

Overcoming dependencies

Building on her central theme of competitiveness, von der Leyen cited access to new tech as a key question for EU sovereignty. “It is an economic and national security imperative to preserve a European edge on critical and emerging technologies,” she said.

In that context, she commended the proposed Strategic Technologies for Europe Platform (STEP) – an initiative designed to boost, leverage and steer EU investment in a range of areas, from microelectronics and quantum computing to biotech, clean tech and artificial intelligence (AI). With companies in need of this support immediately, von der Leyen urged MEPs to make a prompt agreement on STEP’s budget proposal.

Another pressing issue for economic security, von der Leyen noted, is access to raw materials – currently hampered by supply chain bottlenecks and protectionism. “Just think about China’s export restrictions on gallium and germanium,” she said, “essential for goods like semiconductors and solar panels.”

In light of those problems, von der Leyen welcomed the willingness of Japan, Australia and the US to work together – and with other countries – to overcome dependencies on a single supplier. She also praised emerging economies from Latin America to Africa for wanting to develop their own, local industries for processing and refining.

Later this year, she said, the EU will convene the first meeting of its Critical Raw Materials Club – a strategic forum for like-minded countries that want to strengthen global supply chains. And with stronger international ties firmly in mind, she hailed the forthcoming India-Middle East-Europe Economic Corridor – set to include an electricity cable, clean hydrogen pipeline and rail link – as “the most ambitious project of our generation”.

On a similarly ambitious note, von der Layen concluded her speech with thoughts on the future of the EU. “We cannot – and should not – wait for Treaty change to move ahead with enlargement. That means answering practical questions about how a Union of over 30 countries will work in practice.”

The Commission will start working on a series of pre-enlargement reviews to see how each policy area may need to be adapted to suit a larger Union. “It is time for Europe to once again think big and write our own destiny,” she added.

Reflecting on the address, ICAEW Head of European Policy Dr Susanna Di Feliciantonio said: “In her last speech in her current term, Commission President von der Leyen issued a strong defence of her flagship Green Deal policies, while addressing increasingly critical questions over Europe’s current and future competitiveness – a tension that is becoming more and more visible in this pre-election period, as the EU seeks to conclude negotiations on outstanding legislative files. Europeans will signal at the polls next year whether they agree with von der Leyen that decarbonisation and economic modernisation do go hand in hand.”

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