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The recent setback in Europe’s battery industry highlights a key flaw in EU green industrial policy. Despite recognizing the importance of domestic economic strength for geostrategic independence, there seems to be a disconnect in achieving the desired outcomes.
Within the EU’s industrial strategy, batteries have been considered a relative success. The European Commission has identified them as “important projects of common European interest,” facilitating the launch of manufacturing through public subsidies. However, the recent news of European battery projects being shelved or downsized indicates a significant challenge, not related to technology or raw materials, but rather the slowdown in electric vehicle sales affecting anticipated market demand for battery capacity.
This situation reflects a broader issue of a private sector lacking confidence in the ability of political leaders to translate promises into actions.
Despite commitments to phase out internal combustion engines and protect domestic car manufacturers from Chinese competition, the lack of substantial investments by EU carmakers suggests a lack of belief in achieving these goals.
Europe’s approach of setting targets, regulations, and subsidies alone has not instilled confidence in the green technology market. The continent needs to inspire faith in the private sector that there will be a substantial demand for green tech products.
The EU must align fiscal policy, tax incentives, and credit policies to stimulate new markets and ensure long-term demand for green technology. By avoiding budget cuts that could dampen private investment and introducing EU-level funding for green initiatives, the continent can sustain demand for green tech.
Additionally, adjusting tax policies to support emerging markets, similar to Norway’s success with EVs, and leveraging central bank tools to facilitate green investments can drive a green investment boom in Europe.
Ultimately, for Europe to experience a surge in green investments, the private sector needs assurance that governments are committed to supporting green initiatives.
martin.sandbu@ft.com