Friday Five
3rd Feb 2023
European Commission plans to relax state-aid rules in response to US IRA Act
As stated in the title The European Commission is making plans to respond to the US' $369bn Inflation Reduction Act by relaxing state-aid rules and redirecting some of its €800bn Next Generation EU Covid-19 recovery fund towards tax credits.
This would enable member states to align their national fiscal incentives on a common scheme, offering greater transparency and predictability for businesses across the EU.
The reforms also aim to expand the block exemption regime, allowing more state support without explicit commission approval for hydrogen, carbon capture, zero-emission vehicles and energy efficiency measures.
Brussels estimates that industry needs €170bn in investments by 2030 in manufacturing plants for solar, wind battery heat pump and green hydrogen production.
The draft proposal binds together several major legislative reforms, such as an overhaul of the EU’s electricity market and an act to boost domestic production of raw materials.
Vestager acknowledged that not all countries have the same capacity to hand out state aid; Germany and France accounted for 77 per cent of aid given under looser competition rules during the pandemic.
The proposal aims to set up a European sovereignty fund by mid-2021 in order to allow all 27 governments access to funding for state aid.
It also seeks adequate EU-level funding in order to facilitate green transition across the union as a whole.
Why the EU and US Climate Bills Threaten the UK Green Industry
UK green industries are facing a threat from US and EU climate incentives bills. Industry groups have urged the UK government to set more ambitious plans to cut emissions or risk being left behind by competitors in larger trading blocs.
British politicians have warned of an increasing wave of “protectionism” due to the Biden $369bn Inflation Reduction Act (IRA). The CBI employers group has estimated that almost 20,000 businesses within the “net zero economy” contribute £71bn to the UK.
Chris Stark, head of the Climate Change Committee, has stated that there is a risk for capital flow away from Britain if these measures are not taken soon enough. Ed Miliband, Shadow Energy Secretary, has called for the UK to keep up with US and EU in renewable energy investment. Labour has proposed a £28bn “Green Deal” involving state co-investment with green energy companies.
Conservative MP Chris Skidmore has urged the government to respond but cautioned against protectionist walls being built. The UK currently generates 38% of its electricity from renewables due to its windy location and former PM Boris Johnson dubbed it ‘the Saudi Arabia of Wind’.
However, experts warn that Britain could lose out on developing new green technology if they don't invest enough now. Lord Adair Turner, the former chair of the Financial Services Authority and current member of Energy Transitions Commission, suggested that entrepreneurs look to America for IRA incentives.
Nick Cooper from Storegga claims that UK has become less attractive investment destination since COP26 UN climate summit in Glasgow.
Ruth Herbert from Carbon Capture and Storage Association stated that Spring Statement was last chance for the government to back up its net zero emissions policies. The electric vehicle and battery-making industry are highly vulnerable to foreign competition due to the target phase-out of new sales of petrol/diesel engines by 2030 in the UK.
Jeff Pratt, the managing director of the UK Battery Industrialisation Centre, expressed concern about the UK's lack of competition with subsidies that could help convert scientific research into commercial ventures. David Bott from the Society of Chemical Industry noted that German investments are more attractive to chemical companies supplying battery manufacturers.
The government’s free-market beliefs and lack of investment in an industrial strategy have caused a decline in commitments to the hydrogen industry as well. Clare Jackson, Chief Executive of Hydrogen UK, highlighted three examples of Britain losing ground in the hydrogen industry.
Some industry and policy experts are advocating a more selective approach to government support for green energy initiatives.
Chris Jackson at Protium argued that the UK might not be able to win the entire energy transition due to its size and resources. Ana Musat from RenewableUK believes tax breaks and investment allowances should be used as incentives for companies investing in Britain's renewables sector.
The Treasury is reluctant to spend additional money on new technologies due to fiscal constraints and their view that such investments involve "deadweight cost".
Raw materials are crucial for the EU's future, but some locals are resisting plans to extract them
The European Union is facing a major hurdle in its efforts to revive the mining industry and support the green and digital transition. Despite ambitious plans, lengthy permitting processes and local resistance threaten to impede progress.
On average, it takes 10 years for a new mine to start operating, but demand for raw materials is expected surge 500% by 2050 according to the World Bank. This could leave EU policymakers with an acute problem if they don't find ways to speed up the process.
As such, the Commission has been raising awareness of critical raw materials in hopes of streamlining permitting procedures across member states. Unfortunately, this effort may be somewhat limited since regulations fall under national competence and there is increasing local opposition from citizens who fear potential environmental hazards.
This was certainly seen in Portugal, where plans for lithium mines were met with significant pushback from locals worried about safety issues and environmental damage. Experts believe similar resistance could be encountered in other countries when attempting to open new mines or expand existing operations.
To avoid these kinds of delays, the EU must create more streamlined regulations to reduce bureaucracy and administrative burdens while still ensuring necessary environmental protections are in place. Additionally, stakeholders should be actively involved in decision-making so that their voices are heard before any action is taken while providing them with more information on what projects entail.
For now, it's uncertain how successful the EU will be in reviving its mining industry but with rising demand for raw materials it's clear that policymakers will have to take drastic measures if they hope to meet future targets without compromising on safety or sustainability standards.
Ready to explore Africa's mineral deposits responsibly? The African Mining Indbada has everything you need
The African Mining Indaba is almost here! From February 6th to 9th, the mining industry from around the world will join Cape Town to spark change and encourage investments in Africa’s vast reserves of mineral resources.
Circulor will be there, and our team at stand F22 will be there to talk about Traceability, Carbon Tracking and Material Passports for Raw Materials.
Our VP of Sales Fearghal Kearney will also be on stage in a keynote discussion entitled ‘The Future Consumer- Responsible Mining- Transparent Sourcing and the Blockchain.
As one of the largest gatherings of mining professionals, the African Mining Indaba is designed to bring together key stakeholders within the industry to share ideas and potential solutions that can help drive progress across the continent. This year’s event will feature high-level discussions on critical issues such as responsible mining practices and sustainable development.
Industry experts agree that increased transparency throughout the entire value chain has become increasingly crucial for companies looking to enter or operate in African markets. Traceability solutions such as Circulor’s Material Passport can provide invaluable data insights into the provenance of materials used in goods, making them more attractive to corporate buyers and complying with legislation.
At Circulor, we strive to deliver transparency with integrity throughout every step of a supply chain process by utilizing blockchain technology and AI analytics tracking tools. We are committed to creating an ethical future for all industries prioritising sustainability, safety, and social responsibility.
We look forward to meeting you at this year’s African Mining Indaba! Come by our stand F22 and join us for Fearghal Kearney's conversation ‘The Future Consumer’ – it promises to be an interesting discussion on how technology can help shape supply chain traceability in Africa!
If you are attending, you can book a 0ne 2 one meeting here
Circulor awarded Technology Innovation Leader 2022 by Frost & Sullivan
Circulor has been recognized with the Technology Innovation Leadership Award 2022 for its work in the European automotive supply chain management industry by Frost and Sullivan.
This award is a testament to the important role Circulor's technology plays in enabling companies to build more resilient, sustainable, and responsible supply chains: You can read the full story here.
This award recognizes that Circulor has introduced the best underlying technology for achieving remarkable product and customer success while driving future business value and is a testament to the important role Circulor plays in enabling companies to build more resilient, sustainable, and responsible supply chains.
Circulor currently tracks critical battery materials, their GHG emissions, and ESG credentials from upstream to downstream customers, including Volvo Cars, Polestar, BHP, and Rock Tech Lithium, to name a few.
"We would like to thank Frost & Sullivan for recognizing our commitment to technological innovation as we strive to make the world’s most complex industrial supply chains more transparent and help prevent the exploitation of people and our planet.”