Green Deal Industrial Plan

Context:

In a bid to support and expand its green industry, the European Union revealed the “Green Deal Industrial Plan” that aims to cut red tape and provide massive subsidies.

• The move has come just a few months after the United States announced its Inflation Reduction Act (IRA), which contains billions of dollars of tax cuts for clean energy and climate change programs with incentives for US-based manufacturing.

Relevance:

GS II: International Relations

Dimensions of the Article:

1. What is the ‘Green Deal Industrial Plan’?
2. Counter to the USA’s Inflation Reduction Act (IRA)

What is the ‘Green Deal Industrial Plan’?

• According to the website of the European Commission, which oversees trade policy of the EU, the proposal involves building a simpler regulatory framework, providing faster access to funds, enhancing skills and improving the EU’s trade network.

Simpler regulatory framework:

• The plan seeks to formulate a “Net-Zero Industry Act”, which will not only simplify rules but also speed up the issuance of permits for green projects, such as renewable energy generation arrays, carbon capture and renewable hydrogen production facilities.
• It also includes a “Critical Raw Materials Act”, which will provide access to materials like rare earths that are crucial for developing net-zero technology.

Providing faster access to funds:

• According to the proposal, state aid rules will be loosened in order to help EU’s 27 governments with investing in the clean energy projects.
• Keeping in mind that every country doesn’t have deep pockets like France and Germany to provide subsidies to companies, the plan allows countries to take money from existing EU funds.
• Notably, the proposal doesn’t involve any fresh crash and seeks to direct €250 billion to serve the green industry from the existing EU money, which is around €800 billion.
• There is also a provision for setting up a “European Sovereignty Fund” in the future to “give a structural answer to the investment needs”.

Enhancing skills:

• The plan aims to establish “Net-Zero Industry Academies” that will provide up-skilling and re-skilling programmes in strategic industries.
• According to the European Commission’s website, 30 to 40 per cent of the existing jobs might get affected due to green transition.
• Therefore, the “Green Deal Industrial Plan” focuses on developing the skills needed for well-paid quality jobs.

Improving the trade network:

• The plan underlines the importance of open trade and seeks to further “develop the EU’s network of Free Trade Agreements and other forms of cooperation with partners to support the green transition.”

Counter to the USA’s Inflation Reduction Act (IRA)

• The USA’s Inflation Reduction Act (IRA) was announced in August 2022.
• The legislation directs $390 billion towards clean energy projects with tax breaks and incentives for customers and manufacturers.
• The European Union expressed concerns about its discriminatory provisions and the potential for putting European companies at a disadvantage.
• The EU announced their own plan for providing subsidies to sustainable companies.
• Some analysts fear that this may trigger a global subsidy war and question the effectiveness of wide-ranging government support in creating strong industries.
• Critics argue that projects might not be built and companies may fail, wasting money.

-Source: Indian Express