Funding, EU taxonomy identified as challenges to advanced manufacturing at European conference

One focus of the European Commission’s Advanced Manufacturing Industry Conference, which was held mid-April in Brussels, Belgium, was to explore how advanced manufacturing could contribute to net zero emissions. A panel discussion about the topic featured several leaders and representatives of industry groups, manufacturing and finance.

To kick off the discussion, a poll of attendees revealed the biggest obstacles they saw to scaling advanced manufacturing with an eye for achieving net zero emissions. At the top of the list was access to funding.

Graphic: KHL Staff

However, the ensuing conversation revealed a topic intertwined with funding: the EU taxonomy. According to the European Commission, the taxonomy is “a classification system that defines criteria for economic activities that are aligned with a net zero trajectory by 2050.”

Andreas Brunsgaard, head of the Brussels, Belgium, office of the Confederation of Danish Industry (DI), said in the panel discussion that the taxonomy the main tool for driving private capital towards sustainable investments.

“The idea of the taxonomy is really to get an EU-harmonized classification system of what investors can consider as a green investment, with a view to create transparency in the capital market and then an incentive for the investors to direct their investments towards the green solutions in the market,” Brunsgaard said.

Taxonomy Challenges

Brunsgaard is also a representative of Orgalim, the European association for technology industries, and serves on Orgalim’s platform for sustainable finance that advises the European Commission on the EU taxonomy. He later explained that a challenge with the taxonomy is that it doesn’t fully recognize the technologies that will enable some industry sectors in the energy transition.

“I can be very specific — it’s Article 16,” he said. “It is simply so narrow that it’s almost impossible to recognize the enablers.”

Article 16 of the EU taxonomy about these “enabling activities” describes them as “contributing substantially to one or more of the environmental objectives set out in Article 9 by directly enabling other activities to make a substantial contribution to one or more of those objectives.” The article comes with two caveats: the activities cannot lock in assets such that they will undermine long-term environmental goals and they must have a “substantial environmental impact” over their entire life cycle.

“It’s pretty easy if you’re a manufacturer of a window, triple glazed, that’s okay,” Brunsgaard said. “My turnover as a window manufacturer — I can classify that as green. We also have it with turbines, but it’s very difficult. Let’s go to biotech. It’s really difficult with biotech, because we have to guarantee that the biotech is used in a way by the end user which is taxonomy-aligned in the end sector, and that’s very difficult.”

Anne-Gaelle Collot, director of industrial biotechnology for biotech industry group EuropaBio, agreed with Brunsgaard’s assessment.

“Biotech is not recognized there,” she said. “We are in the same classification as the chemical sector.”

Collot said the biotech industry is using alternative processes to those of the chemical industry to create a variety of materials for numerous market sectors. According to the EuropaBio website, this includes biofuels.

Another aspect of the taxonomy that Collot said is having a negative effect on biotech in particular is a recently published delegated act — essentially an amendment — for the taxonomy that restricts the use of primary biomass in plastic packaging. Because the biomass used for plastic packaging is also used to create other materials and chemicals, she said it is preventing biotech from securing funding for other nonpackaging projects.

“For example, in France at the moment, we’ve seen that the investment banks are actually not authorizing or are refusing financing for biotech projects,” Collot said. “So, it has a cascading effect on our on our industry, and the reason is that we don’t have a sustainability criteria that has been defined.”

3D Printing Hurdles

Another manufacturing technology not recognized as “green” by the taxonomy is 3D printing, also called additive manufacturing. Bart Van der Schueren, chief strategy and technology officer for Belgium-based 3D printing technology firm Materialise, said that the company worked on a client project to apply hydrogen to on-highway trucking.

“What this company did was find out that if you mix ash with hydrogen and then with diesel, you can reduce the diesel consumption by 30 percent in a truck engine,” he said. The challenge the client faced was mixing the hydrogen and the ash before adding it to the engine — a challenge Materialise addressed with additive manufacturing.

“Together with that company, we developed a small ring that fits into the air inlet of a truck through which hydrogen is sucked while the air is flowing into the engine,” Van der Schueren said. “In that way, in a very simple way, we can have a huge impact on the emissions of carbon by reducing the fuel consumption in those engines.

“And that is something which is possible thanks to 3D printing, because we are able to make complicated parts in low volumes.”

However, Van der Scheueren said he was surprised that under the taxonomy, additive manufacturing is not classified as a green technology.

“Basically, that means that if we as Materialise — every investment we do is not classified as a green technology. And we see that as a risk.”

Commission Assistance Needed

Brunsgaard said that ensuring access to financing for the activities that enable advanced manufacturing, from automation to IoT to biotech, will require a review of the legal basis for those technologies as defined by the taxonomy.

“We know they always have a positive impact,” he said. “And we can set what’s called ‘do no significant harm’ criteria that they will not cause any harm, even though they’re not used by the end user, which is taxonomy-aligned. They would, at a minimum, be neutral. In most cases, they will have to have a sustainable, positive contribution.”

Brunsgaard added that including such enabling technologies in the taxonomy would allow them to get a green ranking by banks and lenders.

“But we need the political support of DG GROW (the European Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs) and other commission services.”

A Banking Perspective

Antonello Locci, head of the innovative digital technologies and manufacturing industry division at the European Investment Bank (EIB), said the bank has been supporting a variety of investments in advanced manufacturing.

“We do assess both the innovation-enabling role and net zero-enabling role of such investments,” he said. “And just to give an example, if we take broadly over an indicative year, about 10 or 11 billion euros of loans we provide to investments in research, development, innovation and manufacturing deployment, if we think about advanced manufacturing technology, broadly speaking, we are supporting products in the range of 4 to 6 billion euros per year.”

Locci added that the EIB has access to a number of financial instruments to support advanced manufacturing that were developed specifically with the European Commission.

“I would like to mention InvestEU, which has made possible broadening the scope of projects we can support and the risk profile of the operations and projects we are supporting,” he said. “And most recently, and particularly relevant to net zero technologies in the context of the REPowerEU strategy of the European Union, we have been focusing on the REPowerEU Plus package within the bank supporting the deployment of advanced manufacturing technologies.”

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