The EU’s Industrial Accelerator Act (IAA) – intended to support the competitiveness of the bloc’s industries both globally and in the context of industrial decarbonisation – proposes wide-ranging support mechanisms for the bloc’s core industries, according to a leaked version of the legislation obtained by McCloskey, as it continues through the drafting stage.
Originally scheduled for late December, then late January, and now 25 February, the Commission’s upcoming legislative proposal has generated tensions within industry on several grounds, most prominently relating to low-carbon standardisation methodologies, and made-in-EU content requirements across state-managed procurement and financial support initiatives.
The IAA attempts to protect European industrial competitiveness as part of the Clean Industrial Deal – particularly for the steel and steel-consuming sectors – without unduly diluting the EU’s climate neutrality commitments, seeking a harmonization between climate and competitiveness policy.
Describing the IAA’s purpose, the Commission frames “delayed or insufficient progress on climate action” as a significant economic and social threat, stating that “securing and enhancing the Union’s strategic industries is therefore essential to protecting public order.”
The ‘strategic industries’ prioritised by the IAA are “energy intensive industries” – including the iron and steel sector – “net-zero technologies”, and “downstream industries”. The Commission cites high energy prices, global overcapacities, high capital and operating costs, constrained investment, and burdensome regulatory hurdles as dampening EU competitiveness in these areas.
To combat the downward trend, the IAA proposal introduces a new overarching benchmark for the EU’s industrial manufacturing capacity – assessed in terms of the bloc’s total gross value added – targeting a 20% share for manufacturing sectors by 2030.
In the IAA’s impact assessment – revised multiple times since the initial September report following criticisms from the EU’s Regulatory Scrutiny Board – the Commission acknowledges that downstream industries in particular could suffer net losses from the IAA as a result of “adjustment costs” across their supply chains, but consider that “these losses are largely offset by long-term benefits in terms of job creation, enhanced economic security and resilience of the European strategic industries, which ultimately provide stability and sustainable economic prosperity.”
Steel-consuming industries already feel threatened by potential inflationary effects from rapidly intensifying upstream steel trade protections, largely unshielded from substitutive imports in their own markets. A mandate on purchasing higher-value (and higher cost) low-carbon steel could turn these pressures existential, though the IAA and recent Automotive package provide that financial state support mechanisms will be available, conditional on the adoption of low-carbon domestic steel.
“The Union’s manufacturing industry is the largest sector of the Union’s economy in terms of its contribution to employment and value added.
[…]
There is a risk that the Union’s manufacturing industry may not be able to decarbonise fast enough for the Union to achieve its climate neutrality objective while preserving the Union’s competitiveness. Instead, the latest years have seen greenhouse gas emissions reductions coupled with reduced industrial output. The Union therefore needs to accelerate the decarbonisation of industrial processes and products by strengthening the business case for investment in decarbonisation within a globally competitive environment.”
– European Commission, IAA draft
The IAA in brief
As indicated by the Commission’s statements, a primary thrust of the IAA – aptly named the Industrial Decarbonisation Accelerator Act in its initial formulations – is to better prove this “business case for decarbonisation,” introducing new buy-side measures to incentivise demand for locally produced, low-carbon material in public (and private) procurement, facilitated by the creation of a new low-carbon steel label, and attempts at regulatory streamlining or harmonization.
The Commission considers limited demand for EU low-carbon products; difficulties in scaling industrial decarbonisation projects; and vulnerabilities in strategic supply chains as primary weaknesses in the EU’s industrial framework, presenting a range of measures to streamline regulatory barriers, consolidate and advance industrial decarbonisation, and leverage access to the EU’s Single Market for the benefit of domestic competitiveness.
Also included in the Commission’s recommendations are extensive provisions to control external investment in Union industries, aiming to ensure that the EU sees a reciprocal return for allowing positioning within its industrial sectors.
Overall, the IAA represents an attempt to consolidate regulatory mechanisms across industrial supply chains for the benefit of domestic industries, with measures focused on market pillars of supply; demand; bridged by standardisation provisions to better facilitate and encourage low-carbon liquidity across the EU market.
Detailed analysis of the provisions can be found in the links below – it is important to remember that the legislation exists in a leaked, draft form, and could see significant changes before its official presentation 25 February:
Supply – ‘Symbiotic’ Streamlining
Supply-side initiatives under the IAA largely relate to the clustering of industrial activities within designated zones, the streamlining of regulatory approval processes, and provisions on energy access and critical material stockpiling – most notably relating to steel scrap.
McCloskey has analyzed the specific provisions in this sub-article.
Standardisation – Consolidated Certification
EU green steel standardisation was announced as a priority for the Commission in its Steel and Metals Action Plan (SMAP), now implemented as part of the IAA.
McCloskey has analyzed the specific provisions in this sub-article.
Demand – Principled Procurement
Beyond the implied benefits of methodological standardisation for the liquidity of low-carbon steel on the spot market, the IAA introduces a mandatory preference for low-carbon, domestic steels in the form of minimum content requirements for both public procurement, and state-subsidised private procurement from energy-intensive industries.
McCloskey has analyzed the specific provisions in this sub-article.
