By Stefano Mallia, President of the EESC Employers' Group

The Commission's proposal is incomplete and needs to be inserted into a long-term vision for a Competitiveness Agenda.

On 1 February 2023, the European Commission presented its first response to US President Joe Biden's unprecedented climate package, the Inflation Reduction Act (IRA), supporting American industry with a record USD 369 billion in subsidies. The proposal ticks many boxes –predictable regulatory framework, access to funding, adequate skilled workforce and open trade agenda – but after a first assessment, EU employers concur it is very much a work in progress if we are to achieve long-term competitiveness.

First and foremost, we should not forget the other part of the equation of the green transition, the digital transition.

Second, it is useful to point out that subsidies on their own will not do the trick. The real problem the IRA poses is not only the amount of subsidies, which are actually less than what the EU's budget and different funds offer, but rather the combination of subsidies and low energy prices in the US. It is the two together that make the IRA problematic for Europe. Add to the mix the comparatively low productivity of EU industries and indeed we are facing a very dangerous situation for the European economy. Subsidies have already divided EU countries and will ultimately lead to the fragmentation of the single market, harmful races and will weaken regional development.

Third, the Commission's plan seems to be based on an old-fashioned "pick the winner" approach. It hints at a scenario under which policy-makers would set goals for industrial capacity based on sector-specific analysis, and considering the whole supply and value chains, thus determining which businesses to favour for regulatory and financial support. The term "cleantech sector" is already arbitrary, as the green transition takes place across all sectors and all kinds of businesses.

We all know where the real problem lies: competitiveness. There is an urgent need to regain ground and the transition to the green economy provides us with such an opportunity. But being competitive and creating jobs must become a way of life and central to our policy-making. This is why EU employers are advocating for a Competitiveness Agenda.