Critical Raw Materials and Net-Zero Industry Acts: help or hindrance to a competitive EU industrial policy?

We cannot decarbonise the road transport sector without access to critical raw materials and net-zero technologies. The US Inflation Reduction Act (IRA) and China’s massive incentive schemes to boost industrial investment pose serious threats to the competitiveness of the European auto sector.

Earlier this year, the EU signalled it was ready to respond as the threat to EU industries posed by China and the US was becoming increasingly hard to ignore. The EU unveiled its Green Deal Industrial Plan (GDIP), touting both the Critical Raw Materials Act (CRMA) and Net-Zero Industry Act (NZIA) among the centrepieces of its industrial plan.

At that time, ACEA applauded the initiative as a move in the right direction. Almost three months later, more is known, but questions remain as to whether both the CRMA and NZIA can boost industrial competitiveness and prevent investment leakage.

A lot will hinge on what happens at the member-state level. That’s why ACEA supports the proposed KPIs and benchmarks and simplified permitting and approval procedures under both proposals. Reducing administrative burden is just one step, but the initiatives must also be backed up by credible financial resources for realising the so-called Strategic Projects. Further clarity on temporary state aid rules may also help ensure a level playing field.

The effectiveness of the CRMA and NZIA will reveal much about the chances of the EU’s latest efforts to revise its industrial policy, and vehicle electrification will be a key testing ground. The European auto industry is currently racing ahead on electrification, investing more than a massive €250 billion to realise this essential transition. However, an unstable regulatory environment, combined with increasingly attractive investment opportunities outside the bloc, risks putting green investment on hold.

“A secure and reliable European battery value chain is essential to electrification and the sector’s green transition. If we continue to rely on our competitors for access to the critical raw materials powering the electrification revolution, we risk putting the brakes on this transition,” noted Sigrid de Vries, Director General of the European Automobile Manufacturers’ Association (ACEA). “Measures that fast-track the auto industry’s transition to net-zero technologies are also vital to ensuring that we don’t fall behind in an increasingly competitive global electric vehicle market.”

“The CRMA and the NZIA are just part of the story. The European auto industry needs a more ambitious enabling framework to incentivise green investment and boost competitiveness as the United States, China, and others, ramp up their ambitions,” she added.

While questions remain, ACEA recognises that the CRMA and NZIA are a step in the right direction. However, effective implementation and coordination with other EU regulatory initiatives are crucial if the EU is to retain and attract auto investment in the face of growing challenges from other global regions.

A secure and reliable European battery value chain is essential to electrification and the sector’s green transition
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