A fresh report by the scientific advisory board to the German Ministry of Economics has sparked considerable debate in Berlin by sharply criticising the European Union’s Net Zero Industry Act.
According to Die Welt, the document concludes that the EU’s excessive industrial policy interventions are not only unnecessary but also threaten the continent’s economic competitiveness.
The goal is to reduce dependence on other countries, particularly China. However, the advisers argue that this expectation cannot be justified by either climate policy or security of supply considerations. “The government should not strive to actively pursue this goal,” the report states.
The regulation adopted in 2023 requires that by 2030 at least 40 percent of the clean technologies used in the EU –
solar panels,
wind turbines,
batteries,
hydrogen technology
– must be manufactured in Europe. On paper, this is intended to accelerate the European green transition and to prevent Europe from falling into excessive import dependence in this area, primarily vis-à-vis China.
The term “net zero” refers to zero carbon dioxide emissions – that is, the objective that the continent must achieve so-called climate neutrality by 2050.
Serious professional objections
The report was authored by Achim Wambach, president of the Mannheim Centre for European Economic Research (ZEW), and Eckhard Janeba, head of the advisory board. In their view, excessive industrial policy requirements do more harm than good:
They make technologies more expensive, particularly the use of solar energy.
They create unnecessary fears of dependence, for example in solar panel technology.
They slow down the energy policy transition because mandatory local manufacturing limits the possibility of cheap imports and would make photovoltaic energy more expensive.
What is photovoltaic energy? Photovoltaic energy is a form of solar energy: it uses solar panels to directly convert sunlight radiation into electricity. Today it is one of the most important technologies among renewable energy sources, the cost of which has fallen dramatically over the past decade, mainly thanks to Chinese manufacturing.
The experts put it this way: “If Europe were to manufacture 40 percent of its own solar panels, this would only drive up prices and thus slow down the transition to renewable energy.”
Have the bureaucrats missed the mark again?
The German advisers do not reject industrial policy outright, but they would impose strict limits on it: “The best industrial policy now would be to roll back excessive regulation and consistently reduce bureaucracy.”
By contrast, the EU leadership – following Ursula von der Leyen’s Green Industrial Deal – is trying to catch up with the United States and China precisely through targeted support for strategic industries. Reports by former Italian prime ministers Mario Draghi and Enrico Letta have pointed out that Europe has fallen dramatically behind in productivity and investment.
According to the experts, however, this approach is a complete dead end because it distorts the market in the long term. As an example they cited the “automotive, steel and chemical industry strategic summits”, arguing that if every sector declares itself a strategic industry and seeks protection, that would mean the end of an open market economy. Instead, the focus should be on structural reforms and a growth-oriented, less regulatory approach.
As they put it: “We must curb the restriction of economic freedoms in favour of other objectives.”
Trade union resistance
The IG Metall and other trade unions, however, take exactly the opposite view. In their opinion the economy is crying out for even more political intervention than at present: “We need mandatory local manufacturing requirements, job creation and compliance with social and environmental standards.”
Among the “key technologies” to be supported they mentioned the semiconductor industry and the circular economy model that significantly reduces waste generation.
Competitiveness or over-regulation?
According to the article, Economy Minister Katherina Reiche is noticeably listening to the more sober voices that reject Brussels’ over-regulation. The compilation highlights that the CDU politician, for example, has not officially responded to the Social Democrats’ and trade unions’ call for another steel industry summit.
If this direction becomes the guiding thread of German economic policy, there is some chance that a more market- and growth-oriented European industry and trade will gain ground, as opposed to self-imposed restrictions that no one else applies and which only increase Europe’s economic lag in global competition.
Gábor Szűcs is currently an analyst at the 21st Century Institute and a political commentator for Megafon.
