European Politics Divided Between Green Deal and Saving the Automotive Industry
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The European Union aims to lead the global energy transition by promoting clean energy use, especially in transport and heating, to reduce emissions. However, its increase in customs duties on imported vehicles and technologies from third countries raises questions about the true intentions behind this policy. While the European Commission advocates for a rapid transition and open markets, national governments represented in the EU Council adopt a more cautious stance. They fear the economic impact of strong foreign competition on local industries, leading to underlying tensions between the Commission’s climate goals and the governments’ protectionist measures.
Furthermore, there’s an internal division within Europe. Western industrialized countries seek to invest in research, training, and innovation to boost their scientific and industrial capacities for the energy transition. In contrast, Eastern European countries ask security and military spending due to conflicts like the one in Ukraine. The EU and its member states have committed significant financial resources to support Ukraine, which, while necessary for continental stability, risks diverting crucial funds away from investments in the energy transition.
The article suggests that the real, albeit delayed, solution is for Europe to invest heavily in research, innovation, and human capital—much like China has done. By enhancing its own capabilities in green technologies, Europe can reduce reliance on protectionist measures and better balance its climate objectives with economic interests.
By Paolo Licandro
Brussels, 20 September 2024 – 6 MINUTES READ
The European Union is striving to lead the global energy transition, aiming to reduce emissions and promote the use of clean energy, especially in the transport and heating sectors. Central to this ambition is the European Green Deal, which pushes for rapid decarbonization, incentivizes electric vehicles (EVs), and supports technological innovation. This requires massive investments.
However, this ambitious energy transition is increasingly under threat due to growing concerns among national governments about its impact on the industrial and economic stability of Europe. 298 automobile factories operate across Europe. Some are worried that the automotive sector crisis, is a warning sign.
For example, in August 2024, petrol car sales decreased by 17.1%, with all four major markets recording significant declines: France (-36.6%), Italy (-18.8%), Spain (-17.4%), and Germany (-7.4%). Battery electric vehicle (BEV) registrations fell by 43.9% to 92,627 units (compared to 165,204 in the same period last year), with their total market share dropping to 14.4% from 21% the previous year. This was driven by a spectacular decline in the two largest markets for BEVs: Germany (-68.8%) and France (-33.1%). From January to August 2024, 902,011 new battery electric cars were registered, representing 12.6% of the market.
The diesel car market also suffered, with a 26.4% decline, leaving it with an 11.2% share last August. Most European markets saw double-digit drops in diesel car sales.
The logical solution, as suggested by Draghi in his 2024 European Competitiveness Report, would be to make large-scale investments in research and innovation. Draghi calls on the EU to mobilize significant financial resources, including through capital raising in the market, to reindustrialize Europe and strengthen its competitiveness. Unfortunately, this approach has faced resistance from the “frugal” countries, which oppose the creation of European public debt and fear competition in their own capital raising.
Instead, governments have taken a shortcut by increasing tariffs on Chinese vehicles, a protectionist measure that the European Commission does not fully support. While this may offer immediate relief to national industries, it is a shortsighted solution.
Protectionism risks isolating Europe from technological progress, as the real path forward lies in innovation, not in erecting trade barriers. Long-term success will depend on Europe’s ability to invest in cutting-edge technologies and keep pace with global innovation rather than shielding itself from competition.
The Tension Between the European Commission and National Governments
The European Commission, with strong support from the European Parliament, has taken a proactive stance towards the energy transition….Continue reading
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