Debate: Preparation of the European Council meeting of  December
Date: WEDNESDAY, 14 DECEMBER 2022
Speaker: Ursula von der Leyen
Language: EN

Back then, we were concerned for our industry because of the unfair competition from heavy polluters. Today, only three years later, the competition we face has radically changed. A global green tech race has started. That is what we wanted. That is what we need. Because only when the most advanced economies compete for a net zero future will we reach our common goals: to limit global warming and to protect our children’s future.  But this new competition environment also calls for a rethink on our side as to how we support our industry’s green transition and strengthen its global leadership. That is what we will discuss tomorrow at the European Council and it is what I would like to focus on today.  Let me first look at the challenging situation our companies are facing today. Global gas supply remains tight because of Russia’s war of aggression. Russia has cut 80% of its pipeline gas supply to the European Union in the last eight months. But we have been able to compensate. We have diversified. We’re saving energy. We have boosted the rollout of renewables. We’re skimming off the super profits of energy-producing companies to take the money to support vulnerable households and vulnerable businesses. We agreed to buy gas together and we put forward a market correction mechanism to limit the spikes in gas prices. Our stores are filled. So we are, as a result, safe for the winter.  I think we can be very proud of what we have achieved despite the Russian blackmail. And I would like to take the opportunity to thank the Czech Presidency for what you have achieved in the last six months. This is great and thank you very much for that. Yes, indeed, you deserve applause.  Yet all this work we have done comes at a cost. Cheap supplies of Russian energy were part of the business model of many European industries. That model has been shattered by Russia’s attack on Ukraine and the inconvenient truth is that that model will not come back. The International Energy Agency has just reminded us that, in the absence of Russian gas, Europe now faces structurally higher fossil fuel import prices.  So the only sustainable way for our SMEs and our industries is the transition to renewable energy. Renewable energy is not only affordable, but it’s, of course, also home-grown and it creates good jobs here in Europe. But this transition will not happen overnight and global competition is getting tougher. Just look at the United States. They have recently approved a significant investment plan which also sets standards for green tech sectors, the so-called Inflation Reduction Act.  And let us be very clear. First of all, supporting the clean transition is the right thing to do – if you do it right, in a transparent manner, in a spirit of cooperation and in a way that ensures a level playing field. So it should be a race against time and not a race against each other. It should be a race to the top and not a race to the bottom.  Yet there is a risk that the Inflation Reduction Act can lead to unfair competition, and three aspects are particularly worrisome. First of all: the ‘Buy American’ logic that underpins large parts of the Inflation Reduction Act. Second: the tax breaks that could lead to discrimination. And third: the production subsidies that could disadvantage European companies.  We need to address these issues. We need to give our answer, our European Inflation Reduction Act, and I see four main strands of action. First of all, we have to adjust our own rules to facilitate national public investment in the transition. Second, we have to reassess the need for further European public investment in the transition. Third point: we have to work with the United States to address some of the most concerning aspects of this law. And of course, the fourth topic is that we have to further accelerate our transition to green energy.  So to my first point. We need to nurture the future generation of industrial production, our own green tech industrial base – this we have to strengthen. And we need to make sure that investment aid and tax credits reach the concerned sectors more easily and faster.  This is why we will, in January, put forward a new framework to accelerate the transition. It will make our state aid rules simpler and faster for the years to come. And it will close the existing gap to target the whole value chain of strategic green sectors, including large-scale deployment and access to raw materials.  This new framework will, for example, allow Member States to take into account global conditions – not only European – when providing aid for certain green tech manufacturing products. That means that for some greenfield investments, Member States can match the subsidies of third countries, and this will give an incentive to companies to continue to invest in the European Union – not to invest in the United States, but to be here, to stay here and to invest in the European Union.  At the same time, we have to protect our single market from fragmentation and uncoordinated responses – our unity as a single market of 27. And we all know that not all Member States have the same capacity for large-scale investments in strategic sectors. The famous deep pockets: they are not everywhere.  And this leads me to my second point. We need a fair green transition in all of Europe. So to foster green tech across Europe, we need complementary European funding. And here REPowerEU is our tool. REPowerEU is the vehicle that supports SMEs and industries while they transition towards cheaper and cleaner energy. And in this context, I really want to congratulate you and I am very glad that REPowerEU was adopted this morning – late last night – and it enters into force at the beginning of next year. This is a big step forward. Many, many thanks for that. This is an enormous achievement here in Parliament. It’s good that we have REPowerEU now. I think, at the same time, the need for acceleration for renewables will also require a boost of REPowerEU so that we can properly address the new circumstances that have been created through the Inflation Reduction Act. This is in the short term.  In the medium term, however, I think we need a more structural solution because we want European industry to keep leading in the green transition. This is why I introduced the idea of a Sovereignty Fund. And I think the upcoming mid-term review of the MFF around summer will be a good opportunity to put forward our proposal in more detail.  The idea behind it is very simple. Europe is a continent full of strength. Our single market is unique. We have the largest single market worldwide. We have a highly skilled workforce. We have world-class universities. We have a tightly woven network of renowned research institutions. But we also need to galvanise our strong European industrial power in the global fight against climate change. And that calls for a common European industrial policy with common European funding.  I am speaking of beefing up the resources available for upstream research, innovation and strategic projects at EU level – just think of hydrogen, semiconductors, quantum computing, AI, biotechnologies. That’s where we have to make the investments now. And for the first time we will also bring European funding to our successful important projects of common European interest, the IPCEIs. These are strategic investments to maintain our global leadership in the green tech sector.  My third point: we are working very closely with the Biden administration on the most concerning aspects of the Inflation Reduction Act, and we are discussing how to jointly strengthen our clean energy and industry basis. We need to make sure in these discussions that our respective incentive programmes will reinforce each other and that they do not come at the expense of each other.  Think, for example, of the topic of critical raw materials that are needed for green tech. Today – and we know all this – the production and processing of some of the most urgently needed critical raw materials are controlled by one single country, and that country is China. So we share the US concern about this strategic vulnerability that we have. And one of the possible solutions to overcome this monopoly that China has, without any doubt, would be, for example, to create a raw materials club with the United States and with other partners, with the aim of having reliability, transparency, fair conditions and value that stays in the country where these raw materials are being extracted. And we stand ready to work on all this hard-to-achieve joining of forces and to strengthen our industrial basis. Finally, let us recall: all these actions serve as a bridge. It is the bridge for our clean tech industry to transform from today’s costly fossil fuel energy into clean energy and affordable energy – the renewables. We need, therefore, this investment now – because these industries and our SMEs need the support now – until we have achieved an energy environment again that is affordable, that is clean and that is secure. Honourable Members, let us never forget the bigger picture. A war is raging at the borders of our Union. Russia is escalating its attacks against civilians and civilian infrastructure, and the brave people of Ukraine need all our help. Therefore, it is not the time for a trade war with our closest partners and allies. This is a time for our democracies to join forces even more to stand up for Ukraine. I am very glad that we have agreed now on the next round of our EUR 18 billion financial package, which will reach Ukraine in early January. Putin’s war of aggression will fail, mainly for two reasons. The first one is, of course, the enormous bravery and the enormous courage of the Ukrainian people. But the second reason is the international community’s remarkable unity. And therefore, let us stay strong. Let us stand up for Ukraine. Let us be united.