EU efforts to prop up industry still insufficient, clearer pathway needed – Spain’s Feique

MADRID (ICIS)–EU measures to prop up its industrial fabric are going in the right direction, with some key demands of the chemicals industry now worked into regulation, according to the director general at Spain’s chemicals trade group Feique.

Still, more is needed if the 27-country bloc is to salvage what remains of its industrial fabric, said Juan Labat.

He said moves to slow the implementation of the Green Deal are not destined to kill the plan in all but name. He said chemicals remain fully behind the spirit of the Deal, but pointed out that some of its time frames are too tight.

In Spain, the cabinet is preparing an Industrial Policy regulation to be passed after the summer recess in Parliament: Labat praised the law – if anything, because it is the first of its nature in four decades, he said.

In the second part of this interview to be published on 6 August, Labat expands on the good fortunes favoring Spain’s chemicals. The industry is displaying robust growth, despite the many challenges the global economy has faced in the past four tumultuous years, with Spanish unemployment falling and consumer spending strong.

The second part will also touch on Feique’s relationship with the main chemicals trade unions. Chemicals is in Spain almost an exception in which entrepreneurs and their workers tend to largely agree on collective bargaining as well as demands they take to the government as a sector. There was an exception this year where a small dispute on wages ended in the National Court with the judge ruling in favor of workers.

THE EU UMPTEEMTH INDUSTRIAL PLAN
Those who follow the EU’s industrial policies – admittedly, not an attention catching topic for most Europeans but such an important one as the region is aiming to lead the green economy in coming decades – may recall how in 2022, when the US passed the Inflation Reduction Act (IRA), it caught the EU  off guard.

At the stroke of a pen at the Oval Office and a budget of slightly more than $300 billion dollars – small compared to some of the EU’s plans in the past four years – the US swung its doors open to large green investments.

The US, of course, also benefits from lower energy costs thanks to its renewed status as a global producer of crude oil and natural gas.

The US’s IRA and China’s focus to heavily subsidize sectors such as solar energy and electric vehicles (EVs), making them world leaders, forced the EU to wake up to the fact that its Green Deal, a decent attempt at least on paper to fight climate change, needed some tweaks here and there.

One big tweak, long demanded by the industry, has been the so-called contracts for difference, which Labat praised as they contemplate state support for companies while they drop old polluting technologies and adopt new ones, where costs are still much higher.

But Labat was not that positive about the overall implementation of the Green Deal which, as so many EU stories before it, kept being changed by Members of the European Parliament (MEPs) or even by the European Commission which had approved the initial Green Deal in its role as the EU’s executive branch.

Labat is critical of, for example, changes to the deadlines in which polluting technologies must be phased out by, which overall creates high uncertainty for many businesses which want to go greener but are fearful of failing along the way if the regulatory environment are unstable.

“What we saw, for example, with Green Deal targets for certain technologies to be phased out by 2035, which soon after the Deal’s passing were changed to 2033: that is simply not serious and the opposite of legal certainty,” said Labat.

“We want to go greener, but it would help if the authorities understood the huge undertaking this will mean. And, obviously, companies in our sector don’t work out their capex [capital expenditure] plans with just a short or medium term in mind: those assets are planned for several decades.”

In perhaps a sign the pendulum is swinging, EU members find themselves mulling the delay of some of those initially very ambitious targets. After years in which the chemicals’ lobbying in Brussels seem to fall on deaf ears, trade group Cefic and its national associations feel vindicated, finally.

Labat was asked, however, if delaying targets – which potentially could be delayed again and again, according to the circumstances – is not pure and simple giving up on the Green Deal, which foresaw a net-zero EU economy by 2050.

“Absolutely not – we are still very much behind the Green Deal. But I think the world of 2020 looks very different to the one now, just four years in, and more and more people are agreeing that some short timeframes to face out technologies were impossible and, in the end, could hurt the industry in the EU more than benefit it,” said Labat.

“The Green Deal is a good framework, but for it to succeed it cannot be changed practically every month: that only creates uncertainty and I fear if that’s the norm, more and more may decide to set camp elsewhere with their green capex. We have a Green Deal, with clear objectives, let’s work on it, let’s develop it – but don’t keep changing it all the time.”

The Green Deal did look very good on paper – less good seem to have been the implementation policies linked to it, said Labat.

The ‘contracts for difference’ apart, Labat said the EU still must understand the industry needs lower energy costs, which remain the highest among the large world’s chemicals producers.

SPAIN NOVELTY: AN INDUSTRIAL POLICY
The Spanish governments in office in the 1990s and 2000s did not have industry as a key sector to protect and prop up, the world’s own dynamics not helping either as many companies thought at the time moving production to cheaper Asian countries – China – was simply too good of a business plan.

Spain rested on its laurels in industrial policy, while witnessing and ripping the benefits of its services-heavy economy: its tourism prowess being the prime example and a sector which, year after year, hits records.

Over the past 30 years, the tourism sector has more than doubled. In 1995, 33 million visitors visited Spain. By 2023, 85 million did so. This news story by Spanish financial newspaper Expansion shows the data.

But many in Spain see tourism also as a curse. Many economists say that for a country’s economy to be successful, its manufacturing sectors should account for 20% of its output.

Many countries in the EU – France and Spain two of them – have seen their industrial sectors fall to levels of around 10-13% in the past three decades.

There comes in the current coalition cabinet of the center-left Socialist Party and the far-left Sumar party: industrial workers are supposed to be one of its main constituencies, so scoring goals on that front is in their own interest.

The cabinet and chemicals are on the same page on this one, although Labat recognized the fact that an Industrial Policy in itself is a novelty and, because of that, the way it is implemented will be key and success is not guaranteed.

Overall, Feique likes what it is hearing.

“There have been so many Industrial Policies which ended up literally not being worth the paper they were written on. And I think that’s linked that many of them generated frustration among those they were aimed at. Also, many of them seemed to fail to grasp that an ‘industrial policy’ worth the name must be transversal and practically involve all ministries and authorities: it cannot be small, scattered measures here and there,” said Labat.

“It must look and energy and its costs, at employment, and many other issues. The current thinking in the government is indeed for the regulations not to finance or implement specific measures. Instead, it will create government agencies which will oversee the policy’s implementation.

“It contemplates a six-year industrial policy, split in three-year plans, and it’s in those plans where specific and sectorial measures will be implemented. Overall, we are liking what we are hearing. But we are also pragmatic, and past experiences tell us Spain has not precisely been an example of industrial policy success. Touch wood this time it is – chemicals would benefit so much if the things described above end up being implemented and, crucially, they work for everyone involved.

“Finally – we are talking about a draft proposal for now: we will need to see what the law looks like and, more importantly, what resources are allocated to the specific measures set to be announced.”

Interview article by Jonathan Lopez