Integrated EU-US cleantech market could drive green transition – expert

LONDON (ICIS)–The EU and the US could scale up and fast-track the deployment of clean technologies if the two were to integrate their markets in terms of standardisation, regulatory alignment, capital flows and mutually reinforcing incentives.

Speaking to ICIS, Ann Mettler, vice president, Europe for Breakthrough Energy said over the past decade US investors’ participation in EU cleantech deals increased sevenfold, while EU investors’ participation in US cleantech deals increased threefold.

Furthermore, she said that 31% of European ventures which benefited from US capital had funding rounds of $100m or more, compared to only 8%, which did not benefit from US capital.

A report published this summer by Cleantech Group and supported by Breakthrough Energy, an international organisation aiming to accelerate innovation in sustainable energy, also found EU innovators who had US investors reached equity growth around 20% faster compared to those without.

STANDARDISATION

The former director-general and head of the European Political Strategy Centre at the European Commission said new geopolitical dynamics are bringing the EU and the US together despite a sometimes fractious relationship in the past caused by diverging views on digital regulations.

She pointed out that India and China set the new benchmark in terms of market size, with China additionally leading the world as far as solar panel and battery deployment is concerned.

“I would say there are real benefits in closer integration. It doesn’t always have to be complete alignment but mutual recognition of standards and regulations are also important,” she said.

For example, she noted that the wind sector is currently struggling on both sides of the Atlantic not only because of supply chain problems but also because there had been an excess of customisation, which had been pushing up costs and hit profitability.

Standardisation could be a key catalyst to fast-track the mass deployment of cleantech, including wind, at a time when speed and scale are more important than ever before, she said.

One recent success story is that the EU and the US have been able to agree on producing a common charger for heavy duty electric vehicles at the most recent EU-US Trade and Technology Council (TTC), she noted.

However, such alignments ought to be expanded to big-ticket projects including the harmonisation of power grid equipment on both sides of the Atlantic.

“This is really low-hanging fruit, which could be achieved,” she added.

CARBON CLUB

She said the EU and the US were now working to align the standards defining sustainable aluminium and steel.

As an agreement may be reached as early as October, a new standard could have wide-reaching implications on two fronts.

Firstly, since the EU and US economies, alongside Canada and the UK, represent a third of the global economy, meaning that the standards used for sustainable aluminium and steel on both sides of the Atlantic could in fact set standards worldwide and therefore drive a race to the top.

Secondly, such an agreement could form the ‘kernel’ of a carbon club, where different countries with similar standards could trade freely, which in turn could incentivise those with a higher carbon footprint to improve their performance in order to also benefit from seamless access.

The emergence of such a carbon club would coincide with the EU rolling out its carbon border adjustment mechanism (CBAM) in 2026 and following a pilot period which starts from next month. CBAM aims to equalise the price of carbon paid for EU products traded under the EU’s Emissions Trading Scheme (ETS) and imported goods.

“There hasn’t been a product that has been targeted yet. If there is an agreement [on sustainable aluminium and steel] this could be the kernel of the carbon club,” she added.

DIGITALISATION

Another important workstream for the EU and the US would be the digitalisation of public authorities, with a special focus on permitting to help speed up the deployment of cleantech, especially wind, solar and power grids.

Finally, EU companies, including start-ups, could benefit from tapping the US’ liquid capital markets to scale up operations and drive innovation.

“This is more urgent than ever as the EU’s own efforts to complete a capital markets union have been uneven,” she explained. However, she warned that the EU and the US have a limited window of opportunity to identify and work on areas of integration before transatlantic divergences may reappear.

“At the end of the day, there is a lot more that unites than divides us. And there is certainly a lot more we should be able to agree on than a common charger for heavy duty electric vehicles,” she said.