EU industrialists attack Europe’s counter to Biden green bonanza

Leading industrialists have delivered a damning verdict on EU efforts to prevent companies shifting investment to the US, warning the bloc’s competitiveness is rapidly eroding.

Executives from Solvay, Merck and Dow have warned that Europe’s Net Zero Industry Act, announced last week, will not be sufficient to compete with $369bn of green tax incentives and subsidies on offer in the US under President Joe Biden’s Inflation Reduction Act.

“The US has adopted a simple strategy that immediately incentivises businesses to invest while the EU is coming with a political framework that lacks precise elements and misses simple, clear cut reasons for businesses to invest,” said Ilham Kadri, chief executive of Belgian chemicals company Solvay.

“I need simplicity,” she added. “We need a level playing field with the US. It’s called competitiveness . . . and it’s not in Europe’s favour today.”

Belén Garijo, chief executive of German biotech and materials giant Merck, said Europe “urgently needs a holistic industrial policy that enables sustainable change and makes this change a competitive advantage . . . The net zero Industry Act does not solve these issues.” 

The alarm was echoed by Neil Carr, European head of Dow, the US chemicals group, who warned that US incentives made investment in decarbonisation of EU industry “appreciably less attractive” in comparison. “The act ignores the critical importance of enabling investment in industrial decarbonisation to achieve EU climate targets,” he said. The “large sums” of recovery and resilience funds had to be made “much more easily and swiftly accessible”.

The EU last week published proposals that would allow authorities to waive regulatory constraints for strategic projects, streamline permitting processes, boost power grid infrastructure and incentivise investment in supply chains across the bloc.

More than $90bn in green investment has poured into the US since last year’s passage of the IRA. The landmark legislation, which seeks to reduce emissions to half their 2005 levels by 2030, provides tax credits for groups that source parts and materials from countries with which the US has a free trade agreement. That excludes the EU and Japan, which lack such deals with the US.

Volkswagen, BMW and Enel are among the major European companies to review their investment plans in the bloc in light of the IRA.

“If my customers leave Europe, that’s not good for us,” said Solvay’s Kadri. “There is an uncertain investment environment in Europe, which has to be clarified and fixed very quickly. Believe me, if my customers are not here, I’m not going to spend a euro here.”

Garijo said if Europe was serious about competitiveness it needed to “start cutting red tape . . . Enabling competitiveness requires a fundamental shift in policy to attract and retain highly innovative industries.” 

Marco Mensink, head of the European chemicals trade association Cefic, said the EU had failed to understand the fundamental attraction of the US green deal. “They don’t fund the building of a plant. They fund the day you start operating through tax breaks, so you actually make a profit,” he said. “The US has a business case and Europe makes a law . . . In the discussions we’re having with the CEOs, it’s very clear that they’re reconsidering all their investments for Europe.” 

Energy-intensive industries are particularly frustrated by Europe’s response to the IRA. With the region’s energy costs substantially higher than in the US, more needed to be done to reform the bloc’s energy market, said Bertrand Cazes, secretary-general of industry trade body Glass for Europe.

“The measures put forward are not fundamentally improving the business case for long-term industrial investments as they lack decisive actions to address Europe’s high production costs,” he said.

The comments come as business organisations across the bloc warn of the EU’s eroding competitiveness. Some 90 per cent of those surveyed by BusinessEurope across 35 countries said global firms believe the EU is a less attractive investment location than it was three years ago. They blamed high energy prices and increased regulation.

The German Regulatory Control Council has estimated that during the pandemic, EU law added an annual compliance burden of €550mn on companies.

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