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President Von Der Leyen Addresses World Economic Forum

For almost a year now, Ukraine has been impressing the world. That tragic February morning, many predicted that kyiv would fall within days. But that was reckoning without the moral and physical courage of the Ukrainian people. Against all odds, you resisted the Russian invasion and repelled the aggressor. And neither Russia’s relentless attacks on civilians nor the specter of a merciless winter has shaken your resolve. During the past year, your country has moved the world and inspired the whole of Europe. And I can assure you that Europe will always stand by your side.

Critical Weapons to Ukraine

Many were those who questioned the indefectibility of this support. But today European countries are supplying an increasing number of critical weapons to Ukraine. We welcome about four million Ukrainians in our cities, homes and schools. And we passed the toughest sanctions yet, setting Russia’s economy back by ten years and depriving its industry of essential modern technology. There will be no impunity for the crimes committed. And our unwavering support for Ukraine will never let up. Whether it is to help restore electricity, heat and water supplies, or to prepare for long-term reconstruction efforts. And, to reaffirm this support, we announced yesterday that the Commission would provide financial assistance amounting to EUR 3 billion. This is the first tranche of the €18 billion package of support measures for 2023. This aid will strengthen Ukraine’s financial stability, help pay salaries and pensions, and ensure the functioning of hospitals, schools and residential services. We are with you — as long as it takes.

And Europe’s response to war is the latest example of our Union’s ability to come together when absolutely necessary. Take the case of energy. Until a year ago, Europe was heavily dependent on Russian fossil fuels, a dependency accumulated over several decades. This has left us vulnerable to supply cuts, price spikes and market manipulation by Putin. In less than a year, Europe has freed itself from this dangerous dependency. We have replaced almost 80% of the Russian gas transported by pipeline. We have filled our storage facilities and reduced our demand – by more than 20% over the period from August to November. And through our collective efforts, we’ve driven gas prices down faster than anyone could have predicted. After peaking in August, European natural gas prices have now fallen by 80%, to below pre-war levels in Ukraine. Europe has once again shown the power of its collective will.

However, there are no illusions: these times of pandemic and war are particularly difficult for families and businesses. And we will have to show the same determination in the face of these cascading crises. As your Global Risks report indicates. We are witnessing galloping inflation which is driving up the cost of living and doing business. We are witnessing the use of energy as a weapon. We are witnessing threats of trade wars and the return of a geopolitics of confrontation. Added to this is climate change, the cost of which is already immense and which does not leave us a minute to lose in making the transition to a clean economy.

The transition to a carbon-neutral industry is already driving huge industrial, economic and geopolitical transformations – by far the fastest and most dramatic we have seen in our lifetime. It is transforming the nature of work and the configuration of our industry. But we are on the cusp of something much bigger. Think about it: in less than three decades, we want to achieve carbon neutrality.

Usage of New Technologies

But achieving this means that we design and use a whole range of new clean technologies in all sectors of our economy: in transport, in buildings, in manufacturing, in energy. The coming decades will see the greatest industrial transformation of our time – perhaps even the greatest that has ever taken place. And those who design and develop the technologies that will underpin tomorrow’s economy will enjoy the greatest competitive advantage. The magnitude of the opportunity this represents is obvious. The International Energy Agency estimates that, by 2030, the market value of large-scale manufactured clean energy technologies will approach $650 billion a year – more than triple today’s.

To get ahead in this race for competition, we must continue to invest in strengthening our industrial base and making Europe more conducive to investment and innovation. This is what interests investors in the various clean technology markets around the world. Here in Europe, we have taken the lead with the European Green Deal to lay the groundwork for climate neutrality by 2050. We have enshrined our carbon neutral target in law to provide businesses with the predictability and transparency they need.

We have added the investment firepower provided by NextGenerationEU, our €800 billion investment plan, the Just Transition Fund and other economic instruments. This is an unparalleled investment in clean technologies in all sectors of the green transition. Cleantech is now the fastest growing investment sector in Europe – its value has doubled between 2020 and 2021 alone. Other major economies are also stepping up their efforts. Japan’s green transformation plans aim to help mobilize 20 trillion yen, or about 140 billion euros, through “green transition” bonds. India introduced its production-linked incentive scheme to enhance its competitiveness in sectors such as solar photovoltaic and solar cells.

The UK, Canada and many other countries also presented their clean technology investment plans. And of course, we saw the Cut Inflation Act passed in the United States, their clean technology investment plan with its US$369 billion envelope. This means that the European Union and the United States alone are collectively mobilizing almost 1,000 billion euros to accelerate the clean energy economy. This could give a huge boost to the transition to climate neutrality.

But it’s no secret that a few of the business incentives provided by the Cut Inflation Act raise a number of concerns. That is why we are cooperating with the United States to find solutions, for example so that EU companies and EU-made electric cars can also benefit from the inflation. Our aim should be to avoid any disruption in transatlantic trade and investment. We should work to ensure that our respective incentive programs are fair and mutually reinforcing.

And we should also explain how we can jointly benefit from these huge investments, for example by achieving economies of scale on both sides of the Atlantic or by setting common standards. At the heart of our shared vision is our belief that competition and trade are the cornerstones of accelerating clean technology and climate neutrality. And that means that we Europeans must also do better to encourage our own clean technology industry. We have a small window of opportunity to invest in clean technology and innovation to position ourselves ahead of the curve, before the fossil fuel economy becomes obsolete. Our industry has faced a pandemic, supply issues and price pressures.

We are witnessing aggressive attempts to attract our industrial capabilities to China or elsewhere. We absolutely must make this transition to carbon neutrality without creating new dependencies. And we know that future investment decisions will be made based on our decisions today.

We have a plan. An industrial plan that is part of our green pact. Our plan to make Europe the home of clean technologies and industrial innovation on the road to carbon neutrality. Our Green Deal industrial plan will have four pillars: regulatory environment, finance, skills and trade.

The first pillar will deal with speed and access. We need to create a regulatory environment that allows us rapid deployment and the creation of favorable conditions for the sectors essential to achieving the objective of “zero emissions”. These include the wind energy, heat pumps, solar energy, clean hydrogen and storage sectors – demand for which is stimulated by our NextGenerationEU and REPowerEU plans.

To help achieve this goal, we will propose new regulations for a zero-emissions industry. This regulation will follow the same model as the one on semiconductors. The new Zero Emission Industry Regulation will set clear targets for clean European technology by 2030. The aim will be to focus investment on strategic projects along the supply chain. In particular, we will look at ways to simplify and speed up the authorization procedures for new clean technology production sites. Alongside this zero-emission industry regulation, we will reflect on how to make important clean technology projects of common European interest faster to process, easier to finance and easier to access for small businesses and for all Member States.

The regulation for a zero emission industry will go hand in hand with the regulation on critical raw materials. For the rare earths that are essential for the manufacture of key technologies – such as wind power generation, hydrogen storage or batteries – Europe is now 98% dependent on a single country: China. Take lithium. With just three countries accounting for over 90% of lithium production, the entire supply chain has become incredibly tight. This has driven up prices and threatens our competitiveness.

We therefore need to improve the refining, processing and recycling of raw materials here in Europe. And, at the same time, we will work with our business partners to cooperate on sourcing, production and processing to end the existing monopoly. To do this, we can create a critical raw materials club that would work with like-minded partners – from the United States to Ukraine – to collectively strengthen supply chains and make them more diverse to set us free. sole suppliers. So that’s the first pillar – speed and access through regulation for a zero-emissions industry.

The second pillar of our industrial plan will encourage investment in clean technologies and the financing of their production. To maintain the attractiveness of European industry, we need to be competitive with the offers and incentives currently available outside the EU. That is why we will propose to temporarily adapt our state aid rules in order to speed up and simplify things. The calculations will be easier. Simpler procedures. Approvals, accelerated. For example, we will offer simple tax relief models. And targeted support for production facilities within clean technology value chains, to counter the risks of relocation linked to subsidies granted outside the Union. But we also know that state aid will only be a limited solution, which only a few Member States can resort to.

If we want to avoid a fragmentation effect of the Single Market and support the transition to clean technologies across the Union, we also need to increase EU funding. In the short term, we will set up a European sovereignty fund as part of the mid-term review of our budget which will take place later this year. It is a structural solution that will increase the resources available for upstream research, innovation and strategic industrial projects essential to achieving net zero emissions. But because it will take time, we will seek a transitional solution to provide rapid and targeted support where it is most needed. To that end, we are currently working hard on a needs assessment.

The third pillar of the Green Deal industrial plan will be to develop the skills needed to successfully complete the transition. The best technology is only as good as there are qualified people who can set it up and make it work. As new technologies experience strong growth, we will also need strong growth in skills and the availability of skilled workers in this sector. This will apply to everything we do, be it regulation or finance, and will be a priority for our European Year of Skills.

The fourth pillar will be intended to facilitate fair and open trade that will benefit everyone. Achieving global carbon neutrality through clean technology will require strong and resilient supply chains. Our economies will increasingly rely on international trade as the transition accelerates to open more markets and access the inputs that industry needs. We need an ambitious trade agenda, which will also make the most of trade agreements, for example with Canada or with the United Kingdom, with which we are trying to settle our differences. We are working on deals with Mexico, Chile, New Zealand and Australia – and making progress with India and Indonesia. We also need to relaunch the debate on the Mercosur agreement. Because international trade is essential to help our industry reduce costs, create jobs and develop new products.

Similarly, when trade is not fair, our reactions must be more vigorous. China has made promoting clean technology manufacturing and innovation a key priority in its five-year plan. It dominates global production in sectors such as electric vehicles or solar panels, which are essential to the transition. But the race for carbon neutrality must be based on a level playing field. China openly encourages energy-intensive companies located in Europe and elsewhere to relocate all or part of their production to its territory, which they do with the promise of cheap energy, low labor costs work and a more accommodating regulatory environment. At the same time, China massively subsidizes its industry and restricts access to its market for EU companies.

We will still need to work and trade with China, especially to achieve this transition. So we need to focus on risk reduction rather than decoupling. This means that we use all our tools to deal with unfair practices – including the new foreign subsidy regulations. We will not hesitate to initiate investigations if we believe that our public markets or other markets are being distorted by such subsidies.

Ladies And Gentlemen

The history of the cleantech economy is being written now. During all these years that I have been in Davos, I have often heard that we are at the dawn of one of those periods of creative destruction of which the economist Joseph Schumpeter spoke. He believed that innovation and technology replace the old, leading to the abandonment of both the previous industry and the jobs associated with it. This dynamic applies, in many ways, to the clean technology revolution of tomorrow.

But I think if Europe gets it right, the story of the cleantech economy can be one of creative construction. By providing the support and incentives needed for businesses to innovate. With the right focus on skills and people. By providing the right environment to make the most of our world-leading innovation capability. Europe already has everything it needs: talent, researchers, industrial capacity. And Europe has a plan for the future. This is why I believe that the history of the clean technology economy will be written in Europe.

This article is originally published on france.representation.ec.europa.eu

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