Europe is historically the world’s most experienced trader, with the EU currently having free trade agreements with over 70 countries, the euro being the second reserve currency, and the rule of law assured to provide predictability for investments. It also has 450 million consumers to tap, Kerstin Jorna, European Commission director-general for internal market, industry, entrepreneurship and SMEs, said at the event attended by Kallanish.
However, there is much room for improvement.
The EU must stay competitive with China and the US, which means reducing the cost of doing business. Energy prices need to be reduced, but the substantial amount of EU regulation also needs to be simplified and better coordinated for industry to thrive in the bloc, observed European Automobile Manufacturers’ Association (ACEA) director general Sigrid de Vries.
Besides mandates, the bloc needs a market to ensure industrial success. However, for automotive, the market for electrification is not growing fast enough to reach targets. Enabling conditions are still missing – charging infrastructure and the electricity to supply it, she added.
Katja Scharpwinkel, member of the board of executive directors at chemicals giant BASF, meanwhile, said the process of decarbonisation is well underway. However, it is “costing a lot of money and not many customers are willing to pay for it.” She added: “The market is not yet there” for decarbonised products.
Dariusz Marzec, president of Polish public power company PGE Polska Grupa Energetyczna, pointed out energy prices are driven by regulatory costs, which are high especially in Poland, rather than production costs. He called it a “strange” situation that his firm cannot secure financing for natural gas-based energy production investment, despite this emitting 70% less CO2 than lignite-based power generation. This “creates a difficult climate to talk about cheaper energy prices”, he added.
A critical component for the EU investment case is cost of produciton, he continued. Companies will think, “okay, fine, the EU has some good points, but the US has the cheapest energy, so let’s go invest there. That will happen. That is happening,” he noted. Deindustrialisation is underway in the EU, with industry either moving capacity out of the EU or refusing to invest in new capacity because of production cost.
Jorna qualified her earlier EU sales pitch. “Is the best the enemy of good? Do we need to jump straight to the perfect solution? Or do we need to cater for taking it step by step improving along the way?” she asked. Analysing the business case is a crucial new approach in the current Commission mandate.
In terms of the business case, “there’s so much more we can do; it’s fragmented and not connected between countries. This makes it very unpredictable for investments,” she noted. Members states therefore need to align more.
This step by step approach to challenges is crucial, said Marzec. The world has changed and shown that “only real power counts” – military and economic. The EU wants to spend $1.5 trillion on decarbonising, but these funds could be better placed to serve European security and industrial capability, he added. “The world around us has changed dramatically but we have not changed our strategy,” he noted.
Taking a step back on decarbonisation policy means “taking a reality check”, said de Vries. In terms of China, the automotive sector “can vouch for what it means when China takes something seriously”, she noted. The EU needs to answer the question of whether it plans to produce vehicles in future, in the face of this competition.
The bloc can learn from China, which takes a holistic approach to economic growth, with all sectors and goals aligned, de Vries continued. “Regulation does not equal strategy. Strategy is holistic and synchronised,” she added. Having the vision to ensure simplification of regulation and improve competitiveness is good, but the measures need to be actually implemented, she concluded.
