Starting from behind: EU vies to gain ground in green tech race

STRASBOURG — The race to control the technology of tomorrow is on, and Europe is desperately playing catch-up.

The European Parliament on Tuesday passed the Net-Zero Industry Act, a bill to encourage more technology like solar cells and wind turbines to be made in the EU. Lawmakers hailed the result as a mighty signal of Europe’s intent to keep pace with global powers like the U.S. and China, which are both throwing money at green technology manufacturers. The Parliament also recently approved fresh legislation to get Europe mining more of the minerals needed for those green technologies.

“That’s good news for the climate, it’s good news for the European economy and it’s a clear answer to the Americans,” Christian Ehler, a German MEP from the center-right European People’s Party who helped lead the negotiations, said Tuesday after the vote.

But the EU faces tough global competition and a late break from the starting blocks. The U.S. has already approved $369 billion in incentives for climate-friendly investments and local manufacturing, while China has long sought to dominate green technology through robust state support.

The EU is also trying to pull off an ideological shift in the process — from global free-market advocate to protectionist as necessary.

Europe must embrace the change, said French MEP Christophe Grudler, who led negotiations for the centrist Renew group. And it can’t let up now.

“We are sending a signal,” Grudler told reporters before Tuesday’s vote, “but it’s clear that current funds are not enough.”

How is Europe planning to pull it off?

The Net-Zero Industry Act sets a goal of producing 40 percent of the EU’s clean technology domestically by 2030. The legislation includes incentives to help the bloc hit its goal, including fast-track permitting and easier access to funding for certain industries.

​​To inject more global ambition, lawmakers also added a goal for the EU to produce 25 percent of the entire world’s clean technology by 2030.

The legislation is a key pillar in the EU’s broader goal to reach carbon neutrality by mid-century.

China looms over those efforts, however, as Europe still relies heavily on Beijing for everything from solar panels to lithium, a key ingredient for the green transition.

The legislation attempts to reverse this trend by effectively locking Chinese firms out of public contracts for the technology deemed necessary for the EU to hit its climate goals.

Tsvetelina Penkova, a Bulgarian MEP who helped steer talks for the center-left Socialists & Democrats, told POLITICO she wouldn’t describe the approach as “protectionist,” but rather as “progressive” and “ambitious.”

“The rationale," she said, "is that we want to make sure that we’re actually speaking about manufacturing and production capacity, and not just assembling certain products."

Addressing the Parliament on Monday, Internal Market Commissioner Thierry Breton reminded lawmakers of Europe’s messy scramble to divorce another foreign supplier, Russia, after it invaded Ukraine.

The EU, he warned, cannot allow itself to become so dependent again.

“We cannot anymore replace energy dependency," he proclaimed, "with technological dependence."

It’s not over

Even as the Parliament voted the legislation through on Tuesday, some countries were already calling for further tweaks as the legislature begins final negotiations with the European Commission and EU countries.

France wants EU-based companies to receive even greater priority in bids for government contracts — a stance they have pushed repeatedly in talks.

The legislation passed by the Parliament already directs governments to look beyond cost to other factors, such as how a contractor would contribute to the bloc’s green transition, and to cut reliance on foreign suppliers. That language is stronger than the Commission’s original proposal.

France, however, argues that such non-price factors should receive an almost 50 percent weighting in the decision-making process, up from the current 30 percent.

"Ambition is essential if we are to ensure that the aid provided to manufacturers setting up in Europe is not to be in vain," France’s economy, energy and industry ministers wrote in a letter to industry ministers earlier this week and seen by POLITICO.

Grudler, the French MEP, echoed the point in Strasbourg on Tuesday.

“This is the end of naivety in public tenders,” he said.

Show me the money

Agreeing to ratchet up domestic production of wind turbines, heat pumps and solar panels is one thing, but putting serious money behind it is another.

The EU initially considered taking on fresh debt to create a "sovereignty fund" to kickstart such manufacturing — similar to how it helped countries escape the pandemic-induced economic doldrums. Instead, Brussels settled on a much weaker program that combines reallocated EU money with €10 billion in new financing from member countries.

Since then the EU has taken additional steps such as a crafting a plan to boost investment in hydrogen projects, seen as a critical part of cutting carbon emissions.

But even collectively, the aid is a far cry from the cash the U.S. and China have ponied up.

Grudler estimates the EU needs at least €80 billion to €90 billion if it is to get serious about turning its ambitions into reality. But given that the entire green transition is at stake, he argued, paying more for "buying European" is worth it.