New Industrial Strategy Communication: key points
(mainly based on initial analysis provided by Orgalim and inputs from Eurometaux & Digitaleurope)
It is a Communication, accompanied by 3 annexes, on;
- Annual Single Marker Report, which sets out the impact of the crisis on the Single Market, reports on progress made on barriers and in delivering on actions identified in the 2020 Industrial Package; includes an analysis for all 14 industrial ecosystems; and presents a set of key performance indicators (here);
- EU strategic dependencies and capacities analysis; with an in-depth review for a number of technological and industrial strategic areas (here);
- An illustrative analysis of the European steel sector, focused on the challenges and opportunities for industry and the EU policy toolbox available (here).
Single Market Resilience
- The strategy puts a prominent place on the Single Market. The Commission will propose a Single Market Emergency Instrument to ensure the free movement of goods and services in possible future crisis.
▪ This instrument should guarantee more information sharing, coordination and solidarity when Member States adopt crisis-related measures. It will help to mitigate the negative impacts on the Single Market, including by ensuring more effective governance.
▪ Legislative proposal for regulating key business services supported by harmonised standards,
▪ Among the foreseen initiatives, there are targeted measures for speedier product availability (standard setting and sharing, fast track conformity assessment) and enhanced market surveillance procedures. Expected timeline: Q1 2022.
- Strengthen Market surveillance of EU and imported products – The Commission is placing a key focus on strengthening enforcement and implementation of existing rules (including through the Single Market Enforcement Task Force). Among the encouraged activities there will be digitalisation of product inspections and data collection, adoption of state-of-the-art technologies to trace non-compliant products, investing in the digitalisation of product safety and compliance information, and capacity building (Q4 2022).
Open Strategic Autonomy
- Openness to trade and investment is a strength and source of growth and resilience for the EU, as a major importer and exporter. One of the key lessons of the crisis is to get a better grasp of Europe’s current and possible future strategic dependencies. The EU will continue to showcase its preference for international cooperation and dialogue, but also its readiness to combat unfair practices and foreign subsidies that undermine the level-playing field in the Single Market.
- The commission recognizes that “in most cases, industry itself is best placed – through its corporate policies and decisions – to improve resilience and reduce any dependencies that may lead to vulnerabilities, including through diversification of suppliers and substitution with other input materials”. However, the text also mentions that “there are however situations where concentration of production or sourcing in only one single geographical area results in the unavailability of alternative suppliers”. In such cases, the EU reactions could be diversifying supply and demand relying on different trading partners whenever possible, but also stockpiling and acting autonomously whenever necessary.
- One annex is focused on analysing strategic dependencies in the prior identified 14 ecosystems. It includes an overview of reliance on products coming from other areas. The analysis identifies 137 products (representing 6% of the EU’s total import value of goods) in sensitive ecosystems for which the EU is highly dependent, according to the Commission, mainly in the energy intensive industries (such as raw materials) and health ecosystems (such as active pharmaceutical ingredients) as well as concerning other products relevant to support the green and digital transformation. About half of imports for these dependent products originate in China, followed by Vietnam and Brazil. To offset that, the Commission proposes to building a toolbox to reduce and prevent strategic dependencies.
- The Commission will launch a second stage of in-depth reviews of potential dependencies in key areas, including products, services or technologies key to the twin transition, such as renewables or energy storage, In addition, a monitoring system through the Commission’s Observatory of Critical Technologies and a periodic review process will cover both current dependencies and risks of future (technological) dependencies,
- The Commission proposes discussing “the results of this bottom-up mapping with Member States and industry (e.g. in the context of the Industrial Forum) to assess the exact nature of identified dependencies in more detail, including the risks they entail to the resilience and functioning of the EU’s industrial ecosystems as well as possible prospects for reducing these dependencies in the future including through the development of alternatives”.
- The Commission will continue to support industrial alliances in strategic areas, including through the creation of the new alliance on processors and semiconductor technologies and the Alliance for Industrial Data, Edge and Cloud in Q2 2021 (also under consideration an Alliance on Space Launchers and on Zero Emissions Aviation) and continue support Member States through Important Projects of Common European Interest (IPCEIs). The EC recognises Member States & firms showed interest on next-generation cloud, hydrogen, low-carbon industry, pharmaceuticals and a new IPCEI on cutting-edge semi-conductors. The EC vows to examine plans in all these areas. It would support efforts with state aid if criteria are met. Industrial alliances are also seen as a way to help prepare IPCEIs.
- Plans to improve and strengthen the European standardisation system are placed under the chapter on “open strategic autonomy”, giving standardisation first and foremost an international dimension. The strategy clearly sees leadership in global standardisation as a key element to reduce dependencies and attain global leadership in new technologies.
- The new Standardisation Strategy will aim at ensuring an agile and efficient European standardisation system, including an assessment of whether a revision of Regulation 1025/2012 will be required to achieve these objectives. A Joint Task Force between the Commission and the ESOs will agree on solutions to speed up adoption of standards identified as crucial (I believe this is the evolution of the announced “workshop” between ESOs and EC). Expected timeline: Q3 2021.
Accelerating the green and digital transitions of EU Industry
- Co-creation, in partnership with industry, public authorities, social partners and other stakeholders, transition pathways for ecosystems, where needed. Such pathways will offer a better bottom-up understanding of the scale, cost, long-term benefits and conditions of the required action to accompany the twin transition for the most relevant ecosystems, leading to an actionable plan.
- Development of the Energy and Industry Geography Lab, to ensure that energy-intensive industries are well connected to decarbonised electricity generation. It will serve as a geospatial information hub collecting information on the availability of renewable energy sources, energy infrastructures and the location of industrial demand centres, and serve as a tool for companies and energy infrastructure planners.
- Q2 2021 - Actions to promote renewable Power Purchase Agreements in the proposal for a revised Renewable Energy Directive.
- Q2 2021 - Consider European approach for carbon contracts for difference in the proposal for a revised ETS Directive.
- With the Trade Policy Review, the Commission has set out a plan for trade policy to play its full role in the twin transition. As part of its focus on implementation of trade and investment agreements, the EU will use all in- built flexibilities in its existing trade agreements so that they are fit for purpose and respond to the new challenges relating to the green and digital transition.
- As Q2 2021, a legislative initiative on sustainable corporate governance providing for due diligence by companies.
- In addition, the support to green investments will be paired with the development of new standards for green finance.
- Also mentioned some already foreseen or ongoing actions, such as: revision of EU competition rules, evaluation od the State Aid Broadband Guidelines; review of anti-trust rules; “fit for 55” package and CBAM for selected sectors; continued efforts towards circular economy with a functioning market for secondary raw materials; continued actions of ERMA (European Raw Materials Alliance); a number of actions on supporting investments in skills.
Annex I - Annual Single Market Report
- The report conducts a stocktaking exercise on the implementation of the following initiatives and strategies:
o Single Market Enforcement Action Plan
o 2020 Industrial Policy Package
o 2020 SME Strategy
- It identifies 14 Industrial Ecosystems (Aerospace and Defense; Agri-food; Construction; Cultural and Creative Industries; Digital; Electronics; Energy Intensive Industries; Energy-Renewables; Health; Mobility, Transport, Automotive; Proximity, Social Economy and Civil Security; Retail; Textiles; Tourism). These have been identified based on their economic and technological relevance, their expected contribution to the decarbonisation, digitalisation and resilience of the EU economy. As a whole, the Ecosystems represent 70% of the EU economy and 80% of the business economy (as a share of value added)
- For each Ecosystem, the report describes key trends, policy tools, partnerships and relevant networks
- The report also defines KPIs to accompany the implementation of the Updated Industrial Strategy. The EC explains these KPIs could evolve, in line with new data and policy priorities. Importantly, these KPIs do not include specific quantitative targets. Progress on headline indicators on the digital transition would be assessed against data from the Digital Economic and Society Index (DESI) and Eurostat. The indicators are:
- Integration of digital technologies
- Use of internet
- Digital Public services
- Human capital
- Population with basic or above basic digital skills
- The assessment of strategic dependencies involves not only the identification of dependencies, but also an assessment of whether they are of a strategic nature that leads to a vulnerability of the EU, taking into account the risks such dependencies may represent to the EU’s core strategic interests.
- The document provides a definition of some key concepts, such as open strategic autonomy and strategic dependence:
- Open strategic autonomy: the ability to shape the new system of global economic governance and develop mutually beneficial bilateral relations, while protecting the EU from unfair and abusive practices, including to diversify and solidify global supply chains to enhance resilience for future crisis.
- Strategic dependencies: dependencies that are considered of critical importance to the EU and its Member States’ strategic interests such as security, safety, health and the green and digital transformation.
- Both external (from external partners) and internal (within the Single Market) dependencies exist.
- The nature of strategic dependency is determined on the base of impact on safety, security, health as well as inputs and technologies needed for the green and digital transitions
- The bottom-up mapping identifies 137 products in the most sensitive ecosystems where the EU can be considered highly dependent on imports from third countries
- For a subset of 34 goods the dependency is quite high and out of those, 22 products are classified as raw materials and intermediate goods (e.g. some APIs including alkaloids or heterocyclic compounds and some ferro-alloys including ferro-tungsten and ferro-niobium).
- China and US are reviewing resilience of their supply chain. EU and US are mutually dependent and they have dependency from China in some critical sectors (i.e. health and goods belonging to the ecosystems relevant for the EU’s twin transition (e.g. permanent magnets, electric accumulators, cell phones, radio broadcast receivers).
- Policy measures need to be specific and combine increased and diversified domestic production while also consider strategic stockpiling, and should be supported by a fully functioning Single Market, supported by public measures in procurement, targeted funding, support to SMEs, developing skills in EU workforce in identified areas of strategic importance.
- Strategic dependencies have been analysed for six strategic value chains: raw materials, Li-on batteries, active pharmaceutical ingredients, hydrogen, semiconductors and cloud & edge technologies.
On raw materials
- EU does not produce enough raw materials to meet the demand, with global consumption supposed to increase by 90% by 2060 compared to 2017 (based on OECD data).
- With the transition of Europe’s industry to climate-neutrality, the reliance on available fossil fuels will progressively be replaced with reliance on non-energy raw materials.
- Economically important raw materials and with high supply risk are called critical raw materials: 30 were identified in 2020 by the European Commission. Also, last year, the Commission identified dependence on critical raw materials of nine strategic technologies and three sectors (renewables, e-mobility, defence and space), published a Critical Raw Materials Action Plan and launched the European Raw Materials Alliance (ERMA).
- Among the measures to tackle dependency in this area:
- support to investments through the recovery fund;
- development of strategic international partnerships (i.e. Canada, Africa, Ukraine, Serbia);
- new business models such as commodity as a service;
- increase social awareness and acceptance of new mining projects, among others through the development of responsible mining practices for critical raw materials and in 2021 the launch of a “Roundtable on Environmentally and Socially Sustainable Raw Materials Mining”, gathering together the Commission, public authorities, industry, NGOs and other social partners.
On Li-ion batteries
- In 2018, the EU only had about 3% of the global production capacity of Lithium-ion battery cells, while China had about 66% and South Korea together with Japan and other Asian countries about 20%.
- Among the raw materials used in battery manufacturing, cobalt, natural graphite, lithium, fluorspar and phosphorous are in the 2020 list of critical raw materials. Global competition to access those materials is likely to increase.
- Li-ion batteries’ global demand is projected to increase from about 90 Gigawatt hours (GWh) in 2016 to up to ca. 800 GWh by 2025, exceed 2 000 GWh by 2030, and possibly reach up to 4 000 GWh by 2040 under the most optimistic scenario.
- Europe does not have the volumes needed to satisfy this growing demand, as it produces just 1% of the current European demand for Li-on batteries.
- When it comes to processed materials and components, Asia delivers 84% while the EU again has only a relatively small share (around 8-9%).
- Among the measures to tackle dependency in this area:
- In 2017, the Commission launched the European Battery Alliance and the following year adopted the Strategic Action Plan on Batteries (The amount of investment across the electro-mobility value chain in Europe, in 2019 alone, reached €60 billion, which was 3.5 times that of China. The vast majority are private investments, also from third-countries companies). As a result, 15 new battery cell plants have been built across Europe, which may become the second (after China) manufacturer of the lithium-ion cells (batteries) by 2024.
- Actions to support R&I, mainly through the dedicated platform of EBA and other specific initiatives such as the European Partnership for an Industrial Battery Value Chain, under Horizon Europe, with a proposed budget of EUR 925M.
- New legislative framework for batteries, currently under discussion in the EU Council and Parliament.
- Important Project of Common European Interest (IPCEI) authorised in December 2019 involving 17 companies over 7 Member States.
- Developing a European skilled battery workforce, through funding of dedicated projects.
On Cloud and Edge Computing
- Commission’s in-depth review of cloud and edge technologies suggests the following opportunities for the EU’s autonomy: 1) 80% of all generated data is expected to be processed at the edge by 2025, with no current dominant market players; 2) strong growth in software services is a major opportunity for European providers to leverage their position; 3) 5G networks and multi-cloud computing (risk-mitigation tool) constitutes another opportunity.
- Relevant ongoing measures to address dependencies are:
- Regulatory tools (DMA, AI Act)
- Coordinated Plan on Artificial Intelligence
- MFF support to investments in European data spaces and a European cloud federation (Digital Europe Programme, Connecting Europe Facility 2 and Horizon Europe)
- Private and national investments to complement EU-level funding (RRF, multi-country projects)
- IPCEI on cloud/edge (if the criteria for state aid are met)
- Future European Alliance for Industrial Data, Edge and Cloud
Hierna vindt u de eerste reacties van onze Europese comités:
- Orgalim: Industrial strategy must take full advantage of Europe’s global leadership in advanced manufacturing
- Digital Europe: Digital will underpin stronger, greener, more competitive European industries
- Eurometaux: Updated Industrial Strategy prioritises raw materials resilience and industry decarbonisation
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