- The European Union remains steadfast toward its goal of accelerating electrification and decarbonization with a new $105 billion deal.
- It includes the steps needed to not only “re-industrialize” Europe but also make industry greener and more productive.
- This likely comes as a direct response to the United States distancing itself economically and diplomatically from its longtime ally.
There have been talks about the “re-industrialization of Europe” or “Europe’s industrial renaissance” for over a decade. However, while there have been efforts to make this a reality, Europe isn’t the manufacturing powerhouse it once was. Similar to the United States, has relied heavily on tech and manufacturing from abroad, mostly in China.
But now, in the wake of Trump’s repositioning of the U.S. concerning the European Union, the need to re-industrialize gains new significance and impetus as the U.S. distances itself. However, Europe doesn’t want to do this at any cost, and it still wants to stay true to its longer-term objectives of decarbonization and general promotion of clean energy and tech.
The European Commission recently revealed its Clean Industrial Deal, which is described as “a plan for EU competitiveness and decarbonization.” The big news is $105 billion (€100 billion) in funds meant specifically for the clean tech sector, which includes electric vehicle development and manufacturing, as well as other energy-intensive industries that can be made to not only increase productivity but also decarbonize the process.
Many people are switching to electrified vehicles with lower emissions, and the industry is running cleaner than ever. Despite this, carbon emissions in the EU are expected to peak in 2025. However, with the measures the bloc has put in place, emissions are then expected to drop around 25% in the next decade, and keep dropping despite efforts to jumpstart and expand the EU’s manufacturing capabilities.
This new deal doesn’t specifically discuss the electric vehicle sector, but it’s likely a big part of where the money will go. One of the key points, the Affordable Energy Action Plan, has stated goals such as speeding up the rollout of clean energy and accelerating electrification, using energy more efficiently, and reducing the need for fossil fuels. It should also help cut electricity prices and make running an EV more affordable than it is today when it’s not that much cheaper than ICE, especially if you rely on public chargers.
The European Union has enforced its own import tariffs specifically aimed at making it less viable for Chinese manufacturers to sell their China-made EVs in Europe. This was an early indication that the EU wanted to localize production and reverse the outsourcing trend that started decades ago.
This already seems to be working, as many major Chinese automakers are looking to open manufacturing facilities on the continent to avoid tariffs, which can reach up to 45.3%. They are lower for manufacturers deemed by the EU to receive less help and subsidization from the Chinese government, which is seen as giving these companies an unfair advantage.
Even as the U.S. backtracks on its plan to incentivize the purchase of electric and electrified vehicles and it removes the cutoff date for selling combustion cars, the EU has remained steadfast in its ambition to ban the sale of new combustion engine vehicles after 2035. Just five years from now, in 2030, the EU expects new passenger cars to have 55% lower carbon dioxide emissions compared to levels registered in 2021.
Whether this is still realistic remains to be seen. Manufacturers have been voicing concerns about this pace, with some backtracking on their plans to only sell electric vehicles after 2035. The automakers will surely fight the EU to allow them to keep making ICE vehicles beyond that year, especially since the U.S. may no longer have similar targets in place and will thus continue to build them into the foreseeable future. This could give the U.S. an advantage that the EU, given the recent major geopolitical shift, may not be willing to grant. Changes to its 2035 plan might be necessary in order to remain competitive.
This could push back the EU’s broader self-imposed goal of achieving carbon neutrality by the middle of the century. That seems like a tall order to achieve in the space of 25 years, but it could still happen if the EU sticks to its decarbonization targets—all while fighting to balance the need for its industry to be competitive on a global stage that is changing faster than ever.
