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Europe wants its own clean energy industrial policy. It has to deal with the American one first

Can Europe have its own Inflation Reduction Act moment? EU leaders must first figure out the climate law's impact on member countries.
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Episode 28 of the Factor This! podcast features discussions with two of Europe's clean energy leaders -- Jochen Hauff of BayWa r.e. and Axel Thiemann from Sonnedix -- from Enlit Europe in Frankfurt, Germany. The episode will be available wherever you get your podcasts on Monday, Dec. 12.

The contrast was easy to spot.

When the American clean energy industry met at RE+ in September, seemingly every conversation exuded an optimistic tone about the future.

Historic incentives for clean energy in the Inflation Reduction Act, paired with a generational industrial policy, brought U.S. climate goals within reach, at a point when their prospects appeared bleak at best.

Now, billions of dollars of investment is flowing into American clean energy manufacturing.

The outlook couldn't be more different in Europe, where industry leaders recently came together at Enlit Europe trade conference in Frankfurt, Germany. Russia's invasion of Ukraine has exacerbated an already-dire energy crisis, and the continent that once led the energy transition is watching its influence slip.

The U.S. climate law was a frequent topic of conversation for European clean energy leaders, too, but for different reasons. They're still waiting for an Inflation Reduction Act moment, and now have to figure out how the American law is going to impact competition in their own countries.

Jochen Hauff, the director of corporate strategy, energy policy, and sustainability at BayWa r.e. Global, and the vice president of Solar Power Europe, said he hopes the U.S. action will serve as a wakeup call for European politicians.

"I don't think that Europe is anywhere close to the level of industrial policy readiness and willingness like now the U.S. is," Hauff said during an interview with Renewable Energy World at Enlit Europe.

'There's still time'Renewable Energy World content director John Engel (left) interviews Sonnedix CEO Axel Thiemann at Enlit Europe in Frankfurt, Germany. (Courtesy: Enlit)

Even the idea of a European clean energy industrial policy runs afoul of existing institutions.

The European Union protects member states from each other, and the very concept of industrial policy has been a "swear word" in the EU for decades, Hauff said. But it's past time for policymakers to get creative, he added.

"If we all fight for ourselves, likely, that's not going to be the best economic outcome," Hauff said.

What the Inflation Reduction Act proved, maybe more than anything else, is that it's never too late to take on ambitious industrial policy.

And while Europe still lacks a coherent plan to address the world's changing clean energy supply chains, Axel Thiemann, CEO of the independent renewable energy producer Sonnedix, is optimistic that there's still time.

He believes Russia's invasion of Ukraine and soaring energy prices have caused a mindset shift in Europe.

"If you look at the growth trajectory in the scale of growth that we need right now, we are very dependent on Southeast Asia," said Thiemann, whose company has more than 8 GW of controlled capacity in 10 countries. "Rehousing that in the US and ideally in some parts of Europe, it's so very important."

Europe fears impact of the Inflation Reduction ActU.S. Commerce Secretary Gina Raimondo, left, huddles with European Union Executive Vice-President Margrethe Vestager (center) and European Union Executive Vice-President Valdis Dombrovskis at the U.S.-EU Trade and Technology Council meeting in Maryland on Dec. 5. (Photo courtesy: U.S. Dept. of Commerce)

While the Inflation Reduction Act is still in the early stage of implementation in the U.S., European leaders are wary of the impact that the climate law could have on clean energy manufacturing in their own countries.

US and EU trade representatives met on Dec. 5 at the Trade and Technology Council meeting in Maryland to discuss, among other items, the impact of the Inflation Reduction Act on global trade.

The two sides agreed to move forward in discussions about how to resolve concerns from European leaders. While no deal was reached at the meeting, the group will form a new Transatlantic Initiative for Sustainable Trade to support shared climate goals.

A joint statement released by the US and EU said: "We acknowledge the EU’s concerns and underline our commitment to address them constructively."

Speaking to reporters, US Secretary of State Antony Blinken reiterated President Joe Biden's commitment to work with his counterparts in Europe to resolve their concerns. Valdis Dombrovskis, the European Union commissioner for trade, said that he left the meeting "slightly more optimistic" than when he went in.

Dombrovskis pointed out that some provisions of the Inflation Reduction Act still have yet to be implemented and it will be some time before we know the climate law's true impact on Europe.

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