Is it possible that the European Green Deal will usher in a new, innovative industry and thus will pay for itself? Yes, but it may also wipe out the old one and it also needs to find a solution to the dependence on imports of RES components – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl. The states which are advanced in creating a green industry, and which are already exporting green technologies (such as Germany), will be the biggest beneficiaries of the upcoming changes. Whereas, those countries that are behind (such as Poland), will be on the receiving end of the innovations and will find it problematic to use their own advantages – he predicts.
Protectionism is marching
The reason behind writing this column is that during the ongoing crisis, states across the world are resorting to economic protectionism and the same thing is happening in the renewable energy sector, which is to be the driving force of European innovation and competitiveness. The Kommersant daily wrote that the Russian government will add to a draft government decree penalties for insufficient localization of production of RES components. This pertains to projects which were completed without a sufficient participation of domestic industry. The revised draft was handed over by the ministry of industry and trade to the finance ministry. According to the proposal, as of 2025 the penalty for not meeting the localization requirement will be at 100 percent of the value of the contract from the capacity market, which is to subsidize RES in Russia. It may also include limits on export of this type of production. According to Vygon Consulting, the support mechanism designed by Russians is to be worth RUB 400 bn, and it will make it possible to generate up to 8.5 GW of renewable energy. The idea was criticized by the Association for the Development of Renewable Energy. The requirement to increase the level of localization of RES components production means it will be necessary to spend RUB 50 bn.
What are Europe’s specialties?
The International Renewable Energy Agency (IRENA) together with the European Commission created guidelines for developing a European renewable energy industry. The participation of renewable energy sources in Europe’s energy mix may reach 34 percent in 2030, because the majority of EU states have the wherewithal to develop RES, provided a sufficient support policy is introduced, such as the European Green Deal. According to the European Commission, Europe was able to produce components for offshore energy, but it depended on imports of components used for PV panels. This is because of the 2008 economic crisis, which weakened the European industry and due to China’s policy, which supports the export of such products. A comparison of two periods – 2000-2003 and 2012-2015 shows that the participation of wind technologies in EU’s total export increased from 4 to 11 percent, whereas for PV exports, the numbers changed from 5 to 9 percent. Export of clean coal, gas and oil technologies went down from 56 to 45 percent. Import to the EU grew 3.5 times when comparing 2000-2003 and 2008-2011, mostly because of the rising import of PV components from China. The participation of those products in Europe’s entire import soared from 23 to 72 percent in the analyzed period. The differences between countries stem from their level of expertise in particular technologies. Germany has an even trade balance in this regard, because it invests in promoting domestic PV to decrease imports; at the same time exporting wind, coal and hydrocarbon technologies. We wrote on BiznesAlert.pl how that dependence was revealed because of the coronavirus pandemic. Europe’s latest budget is to promote the bloc’s green industry. The EU’s existing export specialty – technologies for the conventional energy industry – is to gain another branch in the form of European renewable energy sources. A third of the budget will be spent on climate goals, and that decision should be understood in the context of strengthening the local development of renewable technologies, as a tool that builds up the EU’s industry competitiveness, especially with the help of the European Investment Bank.
However, it needs to be pointed out that because of the differences between EU states described in EU documents, the pursuit of green innovations will have varied impact. The states which are advanced in creating a green industry, and which are already exporting green technologies (such as Germany), will be the biggest beneficiaries of the upcoming changes. Whereas, those countries that are behind (such as Poland), will be on the receiving end of the innovations and will find it problematic to use their own advantages, such as conventional technologies, which are an important European export material according to the above data. The decision to pursue green technologies may weaken the competitiveness of other energy-related technologies. This is why it is necessary to efficiently use the mechanisms that support the transition, such as the Just Transition Fund and other tools BiznesAlert.pl wrote about. Another tool used by the EU to promote its green technology is the carbon border tax (CBT), which is imposed on suppliers outside of the EU who sell their products cheaply, because, contrary to their European competitors, do not have to co-fund climate policies. This is why Poland believes the funds for facilitating the transition, including the JTF and CBT, should be as big as possible, The European Green Deal needs to take the diversity in the EU and the fact that when it comes to climate policy Europe remains an exception on the international arena into consideration.