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“Without local raw materials, state aid for EU battery factories is futile”

The success of BYD’s electric cars shows how Europe is losing the competition with China in yet another sector. In this op-ed, published in De Tijd (13 January 2024), Peter Tom Jones argues that, in a time of protectionism, Europe needs to undergo reindustrialization, including state aid. Resource nationalism is forcing us towards a mining renaissance. Here below you can find the English translation of this article originally written in Dutch.

(Op-ed published in De Tijd, 13 January 2024, translated to English here)

“Without local raw materials, state aid for EU battery factories is futile”

Author: Peter Tom Jones, Director KU Leuven Institute for Sustainable Metals and Minerals (SIM²) & IOF Innovation Manager Sustainable Metallurgy & Part of Horizon Europe ENICON, EXCEED, LITHOS, CICERO & AVANTIS teams)

 

“The tsunami of Chinese electric vehicles is coming and Europe is sleepwalking towards the abyss.” Not devoid of drama, this is the prelude in our documentary “Made in Europe: from mine to electric vehicle”. With the breakthrough of the Chinese BYD electric cars (De Tijd, 30/12/23) – supported by the Flemish taxpayer – and the framework contract of De Lijn for 500 electric BYD buses (De Tijd, 4/1/2024) – what were they smoking? – this scenario is unfolding before our eyes. Flanders is even actively contributing to it. We see the same trends in many other places in the European Union.

A spectre is haunting Europe: the spectre of de-industrialization. What happened at the beginning of this century with the European solar panel sector threatens to repeat itself with the wind turbine and car industry that cannot cope with the (unfair) competition from China. On average, China already has more than 65% of the global production capacity for electric vehicles (EV), wind and solar energy, batteries, fuel cells, heat pumps, and electrolysers. Bart Haeck hits the nail on the head with: “How does Europe keep its green future in its own hands?” (De Tijd, 9/11/2024).

Europe is at a crossroads today. Either we continue as we are doing with creeping de-industrialization and impoverishment as a result; or we change the gun from shoulder so that the much-needed climate strategy goes hand in hand with cleantech-driven re-industrialization of Europe. We need a long-term vision and ditto industrial policy.

Just as China has brilliantly achieved in recent decades, Europe will have to take its production chains into its own hands, from the mine to EV or wind turbine. This vertical integration is necessary because the neoliberal, free trade-based globalization is over. We now live in an era of protectionism and resource nationalism. The explicit subsidy policy of the Inflation Reduction Act in the US as a direct response to a similar situation, and the more hidden (export) subsidy policy of Chinese state capitalism and its resource-hungry Belt & Road Initiative force Europe to adjust its policy. Necessity breaks law.

For the downstream part of the value chain, this means introducing import duties for artificially cheap cleantech products (the Chinese government does this in the other direction too), which can level the playing field. A subsidy policy can be set up for consumers – like the French eco-bonus system for electric vehicles – which, unlike the Flemish system, effectively discriminates against the import of cars that have been produced in an environmentally and socially unfriendly way. The same goes for company car taxation and public tenders (e.g., e-buses).

This kind of measures is obviously insufficient. Without innovation and commercialization of high-quality, competitive EVs and e-buses, levies and subsidies only provide temporary relief. In terms of supporting the European cleantech industry, the decision of the German government to put almost 1 billion EUR in state aid on the table for a new battery factory of the Swedish Northvolt is a “necessary evil”. It would be even better to organize this kind of state aid at the European level through an expanded European Innovation Fund v2.0 that is financed by taxes on environmentally polluting activities. In this way, we avoid member states being played off against each other by companies looking for the best deal. The expected Net Zero Industry Act is only a first step here.

But… even if we manage to set up a series of cleantech factories in Europe, the question remains how these factories will be supplied with the necessary raw materials. Europe has become painfully dependent on the import of rare earth metals, lithium, nickel, manganese, cobalt, gallium, germanium, graphite… These are all raw materials that are dominated by a handful of rather undemocratic countries and are increasingly being used as a geostrategic weapon.

In the globalized world of yesteryear, European car manufacturers could get away with importing these critical raw materials and exporting the associated social and ecological problems of irresponsible mining. However, this was a shortsighted and even hypocritical approach. Today, this strategy is economically unsustainable. The risks associated with the supply of raw materials are enormous and very acute. The state aid for the new Northvolt factory is wasted money if it does not have access to locally produced raw materials1.

We have no choice but to initiate and co-finance a European mining renaissance, combined with the further expansion of our metal refining and recycling arsenal. The potential for critical raw materials here is much larger than one might think. Finland and Sweden – which are in the top three of the global battery ranking for environmental, social and governance (ESG) criteria – show how responsible mining (and refining) for cleantech metals works in practice2. No exploited miners or metal workers who have to hack their way through, but well-paid employees who operate the excavators (or smelters) remotely with a Playstation controller in their hand. And instead of “Not in my backyard”, the majority of the residents of those mines in the High North proudly say “Please in my backyard”.

The window of opportunity to open European mines is closing in the near future. The clock is ticking mercilessly. With the launch of the Critical Raw Materials Act, the penny has dropped amongst the European institutions. It is now up to the European citizen to adopt this mindset and write a joint future story where Made-in-Europe cleantech ensures the achievement of our climate goals without creating a socio-economic graveyard.

(*On March 27, during the DOCVILLE festival in Leuven, the new SIM² documentary “Europe’s Mining Renaissance: A Catalyst for Climate Neutrality” will be presented in avant-première)

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