Katy Wiese argues that the US has pointed the way to an economy that is just and fair to people and nature, and Europe now should go the distance.
Feminist economists and many others have long-argued that the purpose of our economic system should be to create a good life for people and nature, and that it should be rooted in the principles of care, cooperation and solidarity. Our current economic system fails on all these counts.
There are, however, strong signs of a trend towards green industrial strategy emerging in a number of large economies.
There are, however, strong signs of a trend towards green industrial strategy emerging in a number of large economies. The standout event for this was Biden pushing through the Inflation Reduction Act (IRA) which provided substantial funding for building a green economy in the US. There have been other recent examples such as Japan’s Green Transformation programme and the Indian Production Linked Incentive scheme, but the IRA dominated the debates in the European Union (EU). In response, the EU developed its own plan: the Net Zero Industry Act (NZIA) which is part of its Green Deal Industry Plan. However it turned out to be a mere shadow of the IRA (see box: Inflation Reduction Act vs. Net Zero Industry Act).
Besides climate investments, the IRA also includes healthcare reform such as extending healthcare subsidies and making prescription drugs more affordable. Last but not least, it includes tax reforms such as a 15% minimum tax for companies that earn more than $1bn as well as a 1% excise tax on stock buybacks. While the law certainly contributes to reducing inflation, it was named IRA for political reasons. The name signals the government’s intent to address America’s biggest worry: inflation.
The EU’s Net Zero Industry Act (NZIA) also aims to foster the decarbonisation of the EU’s industry and to boost competitiveness. It includes, among other measures, a set-up of enabling conditions for ‘’strategic’’ technologies, production targets for EU domestic manufacturing, temporarily relaxing state aid rules, acceleration of permitting procedures, enhancement and development of skills, coordination of private funding and repurposing existing funds for a joint European Sovereignty Fund.
The NZIA has been criticised by many as highly unambitious, ineffective, failing to coordinate a true EU green industrial policy thus risking a fragmented approach of co-existing policy initiatives that may even compete with each other.
It also does not provide any new fresh funding resources, which is baffling considering the EU green investment gap of €855bn per year. Under NZIA, public funding would come mainly from national budgets which risks increasing divergence between EU member states as some larger economies like Germany or France have much deeper pockets to provide funding and state aid for the green industrial transition than those who already struggle with their public budgets. For example, state aid to German companies accounted for 53% of the total approved extraordinary aid by the EU since the war in Ukraine started, 24% for French and only 3% for Italian.
This could jeopardise the whole transition. The EEB (European Environmental Bureau) is also deeply concerned about NZIA’s focus on environmental and social deregulation, which assumes that private companies are better suited to allocating resources and capital. The act also bets on expensive technologies such as small nuclear reactors or carbon capture and storage that are not proven and could even divert investments from renewables and energy-saving measures.
Finally, unlike the IRA, Europe’s Green Deal Industry Plan does not condition funding on the achievement of social or environmental goals, does not include provisions to force companies to share excessive profit and does not offer support for community projects.
While there was relief in the European Union (EU) that the US was finally taking bold climate action, many leaders and officials were deeply irritated as they feared European industry would lose out against Washington’s $369bn US investment plan on climate and energy through subsidies and tax credits.
But what about the EU using this industrial strategy with a broader vision for an inclusive wellbeing economy? Here Europe’s NZIA falls short. The package merely aims to protect established EU industry and manufacturing interests against deindustrialisation and competition with the rest of the world.
This is not unusual. Green or sustainable jobs are often viewed as only relating to issues such as energy efficiency, mobility, agriculture or environmental management. Furthermore only 22% of transport, 32% of energy and 10% of construction workers in the EU are women. Women are also regularly underrepresented in new (renewable) energy projects, limiting their active participation and involvement in the energy transition.
This is why we need to broaden our understanding of green jobs. Care work and education are particularly female-dominated sectors that need to be included as jobs at the core of the transition and green industrial policy agenda. Working conditions in these sectors must be brought to the level of male-dominated jobs through fair wages, job security, improved labour standards and access to social protections and childcare. First of all, these jobs can be considered as low-carbon because of their high labour intensity rather than energy or raw material use. Secondly, they contribute to the wellbeing of different generations and the resilience and health of society in general.
The IRA shows that this is not a pipe dream. It recognises care as a low-carbon sector and the importance of safe and affordable care to the functioning of our economies.
While ultimately unsuccessful, the IRA initially included childcare provisions such as a universal pre-kindergarten programme, plans to reduce childcare costs, paid family and sick leave and expansion of the child tax credit. The childcare measures fell by the wayside in the battle to get the measure through the finely balanced US legislature.
Two conservative Democrats refused to support the IRA with the childcare provisions. As no Republican would cross the aisle to vote for a “Democratic,” the IRA would have failed in its entirety. While the measure ultimately failed to pass in the US, the EU should take this as an example. Green industrial policy can serve the decarbonisation of the economy while contributing to gender equality.
Another key opportunity for a feminist green industrial policy agenda is the upskilling and reskilling of women to bridge the gender gap. Women’s relative absence in Science Technology Engineering and Mathematics (STEM) can be tackled by initiatives addressing the pay, pension and opportunity gap, as well as by expanding social infrastructure.
The fact that the NZIA addresses the issue of the skill gap needed for the green transition is definitely a positive.
The fact that the NZIA addresses the issue of the skill gap needed for the green transition is definitely a positive. But training needs to focus on cost-effective, green and socially compatible technologies like solar panels, heat pumps, and building renovation and avoid flawed solutions like Carbon Capture and Storage or biofuels.
Furthermore, it is crucial for Europe’s credibility and ability to attract and retain the necessary talent to ensure that green jobs are decent jobs and that the European Pillar of Social Rights is put centre stage.
Other excluded groups also deserve additional attention. The work done by informal workers, Roma communities, and seasonal and migrant workers needs to be valued properly. Many of the seasonal and migrant workers are also women. They need to be better protected and their skills better recognised and developed. An intersectional approach is key.
All this requires a massive public investment push, common funding and more state intervention towards social and environmental goals. As argued by economist Mariana Mazzucato, Europe needs a new narrative around the role of government, recognising public investments’ role in guiding the economy for green and socially just green industrial transition.
