New Climate Master Plan Could Mean State Stockpiling
On March 14, 2023, the EU Commission will present an initial draft of its Net-Zero Industry Act. The document serves as a master plan to achieve mid-century climate targets and represents a response to the American Inflation Reduction Act (IRA).
This initiated a protectionist “arms race” in green technologies between the EU and the US. The IRA had subsidized electric cars and batteries manufactured in the US with $370 billion. It also promotes companies that produce solar panels and wind turbines using US steel. The EU’s Net-Zero Industry Act shares the objective of becoming independent from third countries for the necessary technologies: by 2030, the EU aims to cover 40% of its green technology needs from its own production.
To achieve this goal, the EU Commission intends to guarantee fixed approval times for green energy supply projects and promote their locations. Additionally, competence centers for climate-neutral technologies, known as Net-Zero Industry Valleys, are to be established.
This is certainly an important step, as the proportion of renewable energy technologies sourced from third countries is currently very high. The solar industry, for example, relies on imports for almost 90%. Here, the goal is for at least 40% to come from domestic production.
But how does the EU intend to ensure the security of raw material supply to implement its plans? The document does not contain a concrete concept for this, but it does include the following passage: “Should the Commission conclude that the (European) Union is not achieving its targets or risks not achieving them, it will, without delay, initiate further measures to close the gaps.” This sounds rather vague at first. What kind of measures are being referred to here?
We believe that the EU Commission is planning state storage of production-critical metals. This option has already been discussed several times. However, the responsible players lack knowledge of the exclusive market for technology metals and rare earths. Although this market is very manageable in terms of value, it is nevertheless highly complex and reacts very sensitively to external market interventions. If the government were to suddenly purchase these commodities in large quantities, prices would almost certainly explode.
Our advice to all investors who want to invest in this promising asset class is therefore: buy in advance! Then you will not only be on the safe side, but will also enjoy considerable tax advantages in addition to the prospect of rising values for these commodities.