The Northvolt collapse signifies the failure of EU green industrial policies

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BrusselsReport.eu
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By Marie Söderqvist, CEO of Swedish think tank Environment and Public Health Institute (EPHI)

Recently, the European Commission’s President, Ursula von der Leyen, published op-eds in newspapers all over Europe celebrating the conclusion of a free trade agreement with several Latin American states, the Mercosur agreement, after 25 years of negotiations.

One might share Von der Leyen’s joy in finally reaching this milestone after more than two decades, or one might reflect upon the fact that everything described in her articles exemplifies the EU’s significant and growing challenges. The text focuses on the protection of European farmers, consumers, quality, and regulations, while it offers little in terms of business advantages.  

Export dependent countries like Sweden, where the Environment and Public Health Institute (EPHI) is based, benefit from free trade agreements. 

A telling fact is that it takes the EU several decades to reach an agreement with four countries, Brazil, Argentina, Paraguay, and Uruguay. And the agreement needs numerous exceptions to be accepted in Europe.

Simplifying trade is difficult for the EU. It takes an enormous amount of time and paradoxically often results in the opposite: more regulations.  

Mario Draghi’s renowned report on the EU’s competitiveness notes that the EU excels at one thing compared to the US, enacting new laws and regulations.  

The European Green Deal, a comprehensive reform package rolled out over the past five years, has made Europe a global leader in green regulations, but not in innovation or growth. EU politicians have set a long-term goal of climate neutrality by 2050. To make this goal more tangible, a 2030 interim target was introduced, aiming for a 55% reduction in emissions compared to 1990 levels. To achieve this, the “Fit for 55” reform program was created, which includes new regulations on emissions from the transport sector, such as the gradual phase-out of combustion engines for new passenger cars by 2035.  

These decisions have led to the rapid rise and fall of battery giant Northvolt, but it is not an isolated case. At EPHI, researcher Jonas Grafström has examined similar cases across Europe. The EU’s generous subsidies, combined with the unrealistic goal of quickly reducing dependency on China, have resulted in several failed and abandoned battery projects all over Europe.  

The EU’s political engineering has failed. China, an early leader in car batteries, has mastered production, secured access to raw materials, and unapologetically utilized subsidies to gain a stronghold in the sector. In Europe, demand for electric vehicles has also fallen short. With just over a decade left until the ban on combustion engines, only 1.7% of the EU’s 250 million passenger cars are electric. At the same time, EU policies have contributed to a crisis in Europe’s traditional car industry, with massive cutbacks and layoffs in the plans.  

Thus, the EU’s green industrial policy has severely harmed the European automotive industry, given China an enormous strategic advantage with its dominant position in batteries and critical raw materials, and failed to establish viable conditions for European battery production. The outcome is deeply disappointing and should amount to reduced trust for politicians amongts the EU’s 450 million citizens, despite the recent presentation of a trade agreement with four Latin American countries after 25 years of negotiations.

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