{"id":64246,"date":"2023-10-09T16:35:09","date_gmt":"2023-10-09T14:35:09","guid":{"rendered":"https:\/\/staging.i4ce.org\/?p=64246"},"modified":"2025-07-10T14:41:11","modified_gmt":"2025-07-10T12:41:11","slug":"taking-a-first-step-towards-a-cleantech-investment-plan-climate","status":"publish","type":"post","link":"https:\/\/staging.i4ce.org\/en\/taking-a-first-step-towards-a-cleantech-investment-plan-climate\/","title":{"rendered":"Taking a first STEP towards a cleantech investment plan"},"content":{"rendered":"

The EU\u2019s Strategic Technologies for Europe Platform (STEP) is an important boost towards unlocking future cleantech public finance. In this blog post, Ciar\u00e1n Humphreys argues that Member States should get behind a European solution.<\/strong><\/p>\n

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The Strategic Technologies for Europe Platform \u2013 a partial solution in need of support<\/span><\/h2>\n

When it comes to cleantech, Europe must ensure deployment at a level that can lock in future decarbonisation, secure resilient supply chains, and build cleantech manufacturing to keep European industry competitive.<\/span><\/p>\n

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The bloc\u2019s largest economies see the need to make dramatic domestic moves to shore up their own share of the technologies of the future – backed by billions of Euros of public investment. Yet many Member States, with <\/span>greater fiscal constraints<\/span><\/a>, are not able to compete on a level playing field. A solution that supports all Member States will need to be at EU level – the Commission\u2019s Strategic Technologies for Europe Platform (STEP) points the way towards such a solution.<\/span><\/p>\n

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Yet STEP is not without its flaws. While it does make the important move of outlining critical technologies for European support and targeting existing funds towards those priorities, its proposed injection of \u20ac10 billion does not make a significant dent in the investment needed to support them. These critical technologies include not only cleantech but other sectors such as artificial intelligence, quantum computing and biotech. The amount of funds available for cleantech will therefore be further limited. Furthermore, Member State support for this new funding stream is low, meaning even this small top-up might be negotiated down to virtually nothing in the coming trilogues between capitals and the EU.\u00a0<\/span><\/p>\n

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Figure 1 – The Strategic Technologies for Europe Platform in Context (Average annual size – \u20acbn)<\/strong><\/p>\n

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However, <\/span>as the International Energy Agency reminds us in its latest report<\/span><\/a>, the pathway for achieving 1.5\u00b0C is narrowing every year. European governments cannot let perfect be the enemy of good. With some changes, and enthusiastic support from Member States already <\/span>calling for \u201cinnovative\u201d EU industrial policy<\/span><\/a>, STEP can start the EU on the path towards a more ambitious solution: a cleantech investment plan.\u00a0<\/span><\/p>\n

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Larger member states are not waiting for the EU on climate investment<\/span><\/h2>\n

From the US to China, active trade and industrial policy are increasingly <\/span>de rigueur –<\/span> particularly when it comes to cleantech. European capitals are responding in kind: French President Emmanuel Macron\u2019s longstanding calls for <\/span>\u201c<\/span>strategic autonomy<\/span><\/a>\u201d<\/span> are now joined by German Economy minister Robert Habeck\u2019s turn towards <\/span>\u201c<\/span>economic security\u201d and \u201cselective multilateralism<\/span><\/a>\u201d<\/span>. It would be a mistake to think that individual countries are the right vehicles to defend against such an significant challenge to the bloc.\u00a0<\/span><\/p>\n

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Europe\u2019s largest economies, France and Germany, are planning large public investments to support these goals. In part buoyed by relaxation of Europe\u2019s state aid rules (which Paris and Berlin <\/span>have benefited from the most<\/span><\/a>, accounting together for 71% of aid authorised under the new regime), both have announced significant public schemes to support their domestic green transitions. Take, for example, Germany\u2019s <\/span>climate tax credit<\/span><\/a> of \u20ac7 billion per year, or France\u2019s announcement of a \u20ac2 billion <\/span>green industrial tax credit<\/span><\/a> (see Figure 1).<\/span><\/p>\n

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This nationally-centred approach is far from a European solution to the shared need for cleantech investment, to which these Member States have only so far paid <\/span>lip service<\/span><\/a>. If this trend continues, we will progress towards a fragmented Europe for cleantech – between those countries with the financial firepower, skills and resources to support their own domestic industries, and those who lack the means or material to contribute. The issue isn\u2019t that national programmes will not succeed at all, but that – by definition – the restriction to national champions will again breed \u201cwinners\u201d who are unable to compete on a larger stage. <\/span><\/p>\n

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A\u00a0<\/strong>European response is needed, but has so far underwhelmed<\/span><\/h2>\n

In Brussels, progress has been made towards a European solution. The <\/span>Net Zero Industry Act<\/span><\/a> (NZIA) (the regulatory pillar of the EU\u2019s Green Industrial Plan) seeks to accelerate permitting and give priority status to cleantech manufacturing projects.\u00a0<\/span><\/p>\n

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The proposed Sovereignty Fund, <\/span>presented<\/span><\/a> alongside the NZIA as the financial pillar of the Green Deal Industrial Plan, was expected to complement the regulatory push of NZIA with public finance. By targeting support to those Member States without the fiscal space to exploit state aid relaxation, the goal had been to ensure that the EU as a whole could make the necessary investments in cleantech.<\/span><\/p>\n

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What has since emerged, the <\/span>Strategic Technologies for Europe Platform<\/span><\/a> (STEP), falls short of the scale needed to be internationally competitive. Announced in June, STEP is largely a reorientation of existing finance streams (including the Cohesion Funds and Recovery and Resilience Facility) towards three strategic technological sectors, namely cleantech, deeptech and biotech. It also calls for an injection of \u20ac10 billion of fresh Member State money into four EU funds: InvestEU (\u20ac3bn), Horizon Europe (\u20ac0.5bn), the European Defence Fund (\u20ac1.5bn) and the Innovation Fund (\u20ac5bn).<\/span><\/p>\n

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From a climate perspective, the \u20ac5 billion for the Innovation Fund is most promising. Recent <\/span>I4<\/span>CE<\/strong> analysis<\/span><\/a> identifies Europe\u2019s largest dedicated climate fund as the best tool bridging the cleantech investment gap in the short and medium term. To do so, it needs more funding – something which STEP and subsequent bigger envelopes can provide.<\/span><\/p>\n

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Is adding \u20ac5 billion in STEP enough? To put this level of investment into perspective, Germany gave out \u20ac15 billion – more than the national budget of an EU Member State such as <\/span>Latvia<\/span><\/a> – to support two chip factories in 2023 alone (<\/span>\u20ac10 billion for one chip plant<\/span><\/a> in Magdeburg and another \u20ac5 billion for another <\/span>chip plant in Dresden<\/span><\/a>). The EU offer pales in comparison.\u00a0<\/span><\/p>\n

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There are also conditionalities on how the additional money should be used. It should only be offered to Member States whose GDP per capita is below the EU average, and with projects that align with the STEP objectives (building up tech development and manufacturing, addressing shortages of labour and skills). According to the text, this should be done under a separate call within the Innovation Fund.<\/span><\/p>\n

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With both national state aid for cleantech and awards of Innovation Fund grants currently heavily weighted towards the richest Member States, such an attempt to target fresh funds towards less wealthy countries is understandable. This conditionality would also direct funds towards Member States with low investment but high potential of developing their own cleantech industries, such as Spain, Italy and Poland.\u00a0<\/span><\/p>\n

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In the short term, STEP therefore is a positive move forward in ensuring the cleantech transition is truly Europe-wide. However, in the interest of long-term efficiency of public spending, more systemic efforts are required. Simply mandating that a proportion of EU funds support projects in less wealthy Member States is not sufficient to build lasting cleantech competitiveness – and should not be depended upon. Public action at EU and Member State level to build the enabling infrastructure, develop the local skills base and incentivise home-grown cleantech scale-ups should be a priority to make the most of the potential of the cleantech single market.\u00a0<\/span><\/p>\n

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Small though it may be, STEP is under attack<\/span><\/h2>\n

Today, the European Parliament\u2019s budget and industry committees will vote on the parliament\u2019s amended version of the STEP regulation. The file has been fast tracked through the EU legislative process, with the aim to conclude trilogues by the start of next year.<\/span><\/p>\n

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In the Parliament the debate around the Net Zero Industry Act has focused on which technologies should benefit from a range of regulatory measures – whether it should focus on a small range of cleantech sectors or be widened to the whole industrial base. A similar dynamic is now playing out around STEP. If the scope of STEP were to be widened beyond critical technologies, this would render the Platform largely ineffectual. The small amount of fresh money is hardly enough to make a dent in the cleantech investment gap (not to mention the considerable investment needs of deeptech and biotech) – spreading the \u20ac10 billion even thinner will rob it of the ability to make any impact on any technology.\u00a0<\/span><\/p>\n

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The challenges for STEP are not over even when it leaves parliamentary negotiations, however – Member States are likely to gut it in trilogue negotiations. It can be expected that, when they have the chance, they will be loath to contribute the further \u20ac10 billion, further limiting its size and impact.\u00a0<\/span><\/p>\n

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A first STEP towards impactful cleantech finance\u00a0<\/span><\/h2>\n

Recently, French and German researchers, with the support of their national governments, published <\/span>a report that outlines a vision for the future of the EU<\/span><\/a>. In it, the authors recognise that an EU that seeks to support Ukraine, welcome new Member States and decarbonise its economy needs a significantly larger budget. To put that vision into practice, albeit in a very limited manner, this brief recommends that EU Member States:<\/span><\/p>\n

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