GDIP: Subsidising profits in the name of the green transition

In its response to the United States’ Inflation Reduction Act (IRA), the European Union has an opportunity to develop an industrial strategy which puts Europe on a path towards a green and just economy focusing on fulfilling social needs. Yet the Commission has cravenly caved in to the clean tech industrial lobby by proposing to give priority to corporate profits and unlimited extraction and consumption of minerals in its Green Deal Industrial Plan (GDIP).

The European Commission recently launched GDIP, intending to boost European ‘net zero’ manufacturing and meet the bloc’s climate targets.

The GDIP is a response to the United States’ IRA - a package of around $400 billion of subsidies and tax breaks for clean technologies to advance domestic manufacturing. EU leaders are feeling mounting pressure to protect Europe’s position and to stop businesses moving to the United States to benefit from IRA incentives and cheaper energy prices.

Geopolitical rifts which became more pronounced after the Russian invasion of Ukraine have driven EU leaders to seek security of their supply chains and access to critical raw materials. The bloc also seeks to reduce dependency on non-EU suppliers in the face of growing raw minerals demand and resource competition across the globe.

This new plan is a proposal for generating corporate profits, expanding extractivism and resource consumption and promoting unsustainable and unrealistic climate solutions like hydrogen and carbon capture and storage technology. It will create neither green nor just future societies. In addition, the GDIP contains no credible proposals on green industrial reform which Europe needs to meet climate targets. Instead, it relies on maintaining business as usual with a ‘net zero’ label.

The plan contains four pillars: a simplified regulatory framework, fast access to public funding, enhancing skills and promotion of open trade to diversify critical raw material supply chains and secure new export markets. The Commission has released a number of legislative proposals as part of the GDIP, notably the Net Zero Industry Act (NZIA) and Critical Raw Materials Act (CRMA).

Free handouts for ‘clean tech’

The GDIP itself does not include new money, and using the EU’s existing multilateral financial framework budget seems unlikely given how depleted it currently is. Instead, it relies on various mechanisms to derisk (guarantee the profits of) private ‘net zero’ projects and investments in critical raw materials. The plan contains reforms of the regulations currently in place to speed up administrative and permitting processes. This will in turn accelerate the allocation of national aid and parts of current EU budget funds (e.g. RePowerEU, national recovery funds or InvestEU investment programmes).

The GDIP also expects funds to be mobilised from national public banks and financial institutions, including the European Investment Bank (EIB) and the European Bank for Reconstruction and Development. The EIB in particular is likely to play an important role, for instance by funding ‘strategic projects’ for securing critical raw materials or through expanded equity finance for large ventures (potentially through a proposed EU Sovereignty Fund).

The derisking approach at the heart of the GDIP (widespread throughout the European Green Deal) is a major concern. It prioritises profitable projects despite a just and ecological transition requiring support for initiatives focused on social needs rather than financial gain. These projects are often not bankable for companies themselves as the public money is needed to make them happen, rather than being used to guarantee the profit expectations of private investors. Businesses benefitting from state aid also do not have to comply with any conditions. They are not required to reinvest profits, restrict dividend pay-outs to shareholders, create quality jobs, respect labour rights or have credible decarbonisation plans.

Green extractivism endangering communities and the environment

The CRMA aims to help secure EU access to critical raw minerals by supporting strategic partnerships and ensuring 10 percent of the minerals which the bloc needs are extracted within the EU by 2030. The act also aims to refine 40 percent of all the minerals used by the EU within its territory in the same time period. Both the CRMA and NZIA ignore the fact that demand for critical raw materials has to dramatically reduce in order to be able to deliver a just, green transition and reach the Paris Agreement goal of limiting global warming to 1.5℃.

The net zero tech race is intensifying pressure on communities and the environment to make way for fast-tracked ‘strategic projects’ including mining and large-scale hydrogen plans. This is happening despite well-documented ecological and human rights impacts and the risk of such projects worsening inequalities. The battle for raw minerals will take place throughout the Global South, creating and exacerbating dependencies on European net zero technology and politicising supply chains even more. Such a proposal - in line with the Global Gateway strategy - is a European neocolonial ambition to monopolise and exploit industrial and raw materials supply chains globally and secure the EU’s ‘green growth’ economic model at the expense of social and environmental justice. It completely disregards the richest countries’ historical responsibility for global warming. Local communities, indigenous groups, women, children and the poorest, most marginalised and vulnerable people will be forced to pay the price of Europe’s net zero race.

Shunning democracy for the industrial lobby

These proposals currently overlook democratic participation and the meaningful inclusion of public consultations and civil society input on what these ‘strategic projects’ actually are. Worse still, while leaving this out, the NZIA’s governance framework assumes coordination and cooperation with existing industrial alliances.

In terms of environmental impact, the proposals offer a very limited window for public consultation and scrutiny and include only extremely weak requirements for environmental and human rights impact assessments. The NZIA and CRMA further exacerbate concerns over their ecological and social impacts by allowing nature conservation and water protection regulations to be jettisoned in favour of securing critical materials supply. Given the scale of damage associated with mining projects, it is deeply worrying that the CRMA proposal does not ensure consent of indigenous communities for such activities.

The Commission’s plan completely misses an opportunity to shape a just and sustainable transition towards a green economy and industrial policy developed around societal needs - like quality jobs, public transport, healthcare, education, affordable housing and renewable energy access. Instead of prioritising smaller businesses, decentralised renewable energy and the EU’s climate targets, it promotes corporate profits subsidised by taxpayers, unworkable clean tech solutions and the endless consumption of raw materials to keep running in the global net zero industrial race.

In a race fuelled by runaway extractivism and private interests, there are no winners. If people are to truly finish first, the EU must compete to improve societal conditions, not corporate profits.