BRUSSELS — The European Commission’s flagship plan to breathe new life into the bloc’s struggling manufacturing sectors has governments fretting about trade relations and interventionist industrial policy.
But make no mistake: This is a climate law in disguise.
The EU executive’s long-awaited Industrial Accelerator Act (IAA) arrived Wednesday after several months of delay, setting out a host of measures to boost demand for made-in-EU products and thus strengthen the bloc’s industrial base, create jobs and reduce import dependencies.
The act’s “made in Europe” proposal, which will require governments and other public authorities to channel taxpayer money toward products that meet new European content requirements, has stolen the spotlight.
When EU industry chief Stéphane Séjourné presented the IAA on Wednesday, he focused on defending the made-in-EU concept and the bill’s economic benefits. Pushback from within the Commission, EU capitals and partner countries has also largely focused on trade and investment restrictions.
By contrast, the IAA’s green ambitions have flown under the radar — even though they are just as central to the bill.
At a press conference Wednesday, even Séjourné eventually acknowledged that truth: “We need to be very clear — the Industrial Accelerator Act is going to accelerate decarbonization. That’s the whole point of it.”
The act funnels taxpayer money not toward made-in-EU manufacturing overall, but into low-carbon materials and net-zero technologies produced in the bloc. A quarter of construction-related steel that governments purchase, for example, will have to meet green criteria.
In this way, the Commission seeks to solve the key problem that is holding back industrial decarbonization — the uncertainty around whether anyone will buy greener goods, which currently tend to be more expensive than conventional products. Public money, through the IAA, will guarantee a certain level of demand.
It’s not an accident that the green angle has gone relatively unnoticed. The bill was once called the Industrial Decarbonization Accelerator Act, but the climate reference was quietly dropped a few months ago. The bloc’s climate chiefs were also nowhere to be seen on Wednesday, with Séjourné presenting the bill alone.
That green-hushing aligns with a broader tactic that could pay off at a time when overt climate policies face substantial backlash in the EU.
The Commission has already shifted away from the language of the Green Deal, preferring “clean” over “green” and security rhetoric over moral arguments. Even former EU climate chief Frans Timmermans, the architect of the Green Deal, told a recent event in Athens that, given the backlash, “why don’t we rephrase the Green Deal? Why don’t we give it another name?”
In that sense, the IAA might well be a climate policy fit for the EU’s competitiveness era. Its impact on the bloc’s industrial emissions, however, remains somewhat uncertain.
Small carrots
Manufacturing is responsible for around a quarter of the EU’s planet-warming pollution. To bring that down, Brussels already employs an arsenal of sticks, notably the Emissions Trading System (ETS), which obliges factories to pay for the CO2 they release.
The IAA is meant to act as more of a carrot. Two key obstacles to industrial decarbonization are high upfront costs and foreign competition from companies that enjoy massive state subsidies or cheaper energy costs abroad. The latter is also a major problem for the EU’s nascent clean-tech and electric vehicle sectors, where the threat of China’s vast capacity looms large.
The Commission’s proposed solution focuses on ensuring that EU taxpayer money funds European-made products that benefit or at least don’t harm the climate, creating predictable demand that justifies the required investments for companies.
Basically, instead of dropping another law that places burdens on companies, Brussels is now demanding that governments spend their money on greener stuff — thereby encouraging industry to invest in decarbonization to win public contracts.
The potential, in theory, is enormous: Public procurement amounts to 15 percent of the bloc’s GDP, or more than €2 trillion annually.
But the IAA leverages only part of that potential, and tackles only a fraction of the bloc’s industrial emissions.
Taken together, the bill states, the sectors covered by the IAA — steel, cement, aluminum, electric cars and other clean technologies — account for around 15 percent of manufacturing in the EU, for all that they “play a disproportionate strategic role.”
Steel and cement are key emitters, accounting for around 5 percent and 4 percent of the greenhouse gas pollution the bloc produces, respectively. Critics have warned that the quotas set out in the IAA are too low to substantially bring down emissions.
The IAA demands that 25 percent of steel products bought by public authorities for use in construction or transport meet low-carbon standards, albeit without requiring they be made in Europe. Another 25 percent of aluminum and 5 percent of cement purchases have to meet both low-carbon and made-in-EU criteria.
The low cement quota, in particular, has come under fire.
“A 5 percent quota for public procurement of low-carbon concrete falls far short of what is required to genuinely create a lead market for low-carbon cement and concrete across Europe,” said Susan McGarry, public affairs director at low-carbon cement maker Ecocem.
“In fact, Europe already consumes far more than 5 percent low-carbon cement and concrete today,” she added.
Details TBD
Besides steel, aluminum and cement, the proposal also covers electric cars and certain net-zero technologies — namely batteries, heat pumps and electrolyzers as well as wind, nuclear and solar components.
For example, one year after the act takes effect, one component of wind turbines must be made in the bloc, increasing to two components once the act has been in place for three years. For heat pumps, the entire final product has to be made in the EU after three years, while all publicly procured EVs will have to be assembled in the EU within six months.
But unlike earlier drafts, the final version of the IAA no longer sets requirements for plastic products such as pipes and insulation.
A voluntary low-carbon label for steel, included in earlier drafts, also doesn’t appear in the final version. Instead, a broader label for industrial products will be drawn up later this year.
The label isn’t the only can the EU executive kicked down the road. Notably, definitions for “low-carbon” steel, aluminum and cement will be provided in follow-up legislation.
“The IAA’s low-carbon criteria depend entirely on delegated acts that haven’t been written yet,” said Irene Domínguez Pérez from climate-focused nonprofit Bellona. “The Commission must treat those delegated acts as a matter of urgency; without them, we cannot mobilise European public money to drive the transformation of our most polluting industries.”
Now that the proposal is out, it’s up to EU governments and the European Parliament to amend and negotiate the final version of the IAA.
Europa Monitor is a seasoned News Editor with over a decade of experience in journalism. Known for his editorial expertise and commitment to accuracy, Europa Monitor leads teams to deliver high-quality news content.
