The European Commission has proposed a “Buy EU” plan to boost domestic low-carbon industries and help the continent compete against China.
The commission published a draft regulation on Wednesday, called the Industrial Accelerator Law, setting out demands for low-carbon, EU-made content for bodies spending public money. The rules mark a major shift in economic thinking in Brussels, long a bastion of open markets.
But after internal disputes, EU officials left the door open to including countries with close economic ties to the bloc, such as the United Kingdom, if there is reciprocal market access.
Stéphane Séjourné, vice president of industry at the European Commission, described the law as “a change of doctrine” that would have been “unthinkable even a few months ago.”
Alluding to turmoil in the Middle East that has sent energy prices soaring, Séjourné, the former French foreign minister, said developments in Iran underlined the need for a plan to shore up European industry. “Without a strong industrial base, without a European social model, we will not have any climate transition and we will not have strategic autonomy,” he said.
Inspired by the French government’s ideas, the plan is a response to intense competition from Beijing that has seen Europe lose its once-thriving solar panel industry to China. Séjourné said: “If we do nothing, then it is quite clear that very soon 100% of the technology will be produced in China.”
EU officials suggested that the United Kingdom and Japan could be considered domestic producers when it comes to the procurement of electric vehicles, because their markets are open.
By contrast, countries with more closed markets, such as the United States and India, would likely face restrictions. Séjourné declined to specify “who is in and who is out,” although he promised a “reciprocity assessment” of the EU’s trading partners in the coming months.
It was quite possible, he added, that the European cement and steel industries would be “completely offshored” in the coming years if action was not taken.
EU officials said that today around 50% of batteries and 94% of photovoltaic solar cells and modules used in the EU are imported from China.
The plan seeks to reverse Europe’s industrial decline, setting a goal for manufacturing to account for 20% of Europe’s GDP by 2035, up from 14.3% in 2024.
To achieve this goal, local and national authorities would be required to meet “Made in EU” content targets when spending public money or designing subsidy programs for goods in “strategic sectors”, including green technology and cars. For example, at least 70% of electric car components (excluding the battery) would have to be manufactured in the EU, when purchased by governments or benefiting from public funds.
Authorities would also face requirements to buy more expensive low-carbon steel, aluminum and cement.
Foreign companies investing in the EU in key sectors will also have to ensure job creation in the bloc, in a bid to reflect Chinese requirements. For example, a foreign company making an investment of €100 million or more in clean technology would have to guarantee that at least 50% of jobs go to EU workers, in addition to meeting other conditions on ownership, innovation and research.
The commission believes the plan could create and preserve 150,000 jobs in the cleantech and low-carbon sectors.
The plans have sparked alarm among trading partners including the UK, Japan and Türkiye. UK Business Secretary Peter Kyle urged the EU to stop “putting up barriers” during a visit to Brussels last week.
The draft regulation states that countries with an agreement creating a free trade area or customs union with the EU would be considered local. That involves countries in the European Economic Area, such as Norway and Iceland, and also Türkiye, which has a customs union with the EU.
The same openness could apply to 21 countries that have signed a WTO agreement on public procurement, including the United Kingdom and Canada.
The plans were welcomed by Green MEPs co-leader Bas Eickhout. “Europe needs to leave behind a little of the naivety that we had,” he told reporters before the final publication. “There is no open global market. Look at the United States, look at China, look at all the big players; they are all pursuing industrial policies. It is time for Europe to start doing that too, and in some ways the Industrial Accelerator Act is a careful first step.”
The German Engineering Federation, the VDMA, which represents 3,000 small and medium-sized companies, warned that local content rules should be designed with great restraint. “The focus on local content distracts from Europe’s real challenges, such as high administrative costs, a weakened domestic market and Europe’s lack of technological leadership,” said Thilo Brodtmann, executive director of the VDMA.
