Bastian Meinig, Dominique Buoncuore, Eike Gansäuer and Jan Lucas (Public Funding Experts for Decarbonisation in Düsseldorf) discuss how funding can play a crucial role for the glass industry on the pathway to carbon neutrality.
'Hybrid Furnace of the Future': That was the title of an ambitious project led by 19 glass companies, supported by the European Container Glass Federation, which aimed at cutting the CO2-emission by up to 60%.
Despite being a possible step to secure the future of the European glass industry in a climate-neutral Europe, this promise was not attractive enough to be selected for funding in the European Innovation Fund of the European Commission.
So, the question remains if and how funding can become a vital factor for the glass industry´s efforts to decarbonise its production processes.
In the recent past, European governments have publicly announced their wish to support industries in their necessary transformation path to reduce their carbon footprint.
This seems logical: decarbonising is associated with immense capital expenditures and a regulatory package, leading to increasing operating costs (both staff and energy related). In this context, subsidies for rising costs are without alternative to secure the international competitiveness of glass.
Fig 1. Funding for glass industry in Europe (blue – tax refunds, green – direct grants, pink – credits and guarantees). For full size image, click here.
And yet: funding landscapes on all levels (EU, national and regional) are built up in very untransparent schemes, hardly manageable for their target industries, while decisions of granting bodies often remain incomprehensible.
Being already under pressure to ensure the survival of a qualitative production, the glass sector misses time and know-how to decipher the funding map leading to pragmatic financial support.
European Green Deal, National Strategies, Regional support: What’s in it at all for the glass industry in Europe?
The answer is: attractive funding opportunities do exist, especially for decarbonisation and energy/resource efficiency activities. A prerequisite for pragmatic funding is that the actors understand the overall structure and prioritise the paths that make sense for their specific projects.
‘Funding of the glass industry in Europe for dummies’
Today, glass manufacturers in Europe have several opportunities for financial support. Consulting the Database for State Aid of the Directorate General for Competition of the EU quickly confirms that the glass industry in Europe has been awarded multiple grants in the past few years.
These range from specific local funding programmes to subsidiaries on the European level.
The subsidy-cases differ from each other by the ‘state aid instrument’ they use. State aid can be delivered mainly in the form of a direct grant, a tax reduction/tax advantage, a soft loan or a guarantee.
They also differ from each other regarding the ‘state aid objective’ they serve. This objective is the purpose which is followed by the EU or a member state and legitimates the state aid itself.
The General Block Exemption Regulation (GBER) defines many of these objectives. For instance, state aid can be legitimised for industrial research and experimental development, environmental protection, the promotion of energy from renewable sources or increasing energy efficiency.
One single European frame, many different national realities
The classification of the State Aid into the categories ‘state aid instrument’ and ‘state aid objective’ is the result of the competition laws, which are valid throughout the EU.
This homogenised framework is implemented in different ways on the member state level. Therefore, when taking investment decisions, the glass industry should take the funding schemes offered on the national level into consideration.
Fig 1 gives an overview of the fundings awarded inside the glass industry by each single Member State: each bubble represents one project; the surface area of the bubble is proportional to the amount of funding.
When comparing different countries, it strikes out that German manufacturers receive a disproportionately high amount of funding overall. Here, the main state aid consists of tax refunds (=’state aid instrument’) for sectoral development and environmental protection (=’state aid objective’).
The second biggest ‘state aid instrument’, direct grants, must not be neglected though: this is a strong, pragmatic instrument to enable investments, especially in energy and resource efficient production facilities.
Even if the total amount of direct grants seems optically smaller in comparison to tax refunds, the overall funding amount is still very high and stands out as an unequalled feature throughout Europe.
The funding schemes fundamentally differ in most other countries like Italy or Belgium, where funding is not such an important financial factor. Here, manufacturers often receive grants for regional investments to support structurally weak areas.
Considering that Germany is the biggest glass producer in Europe, it might seem reasonable to argue such numbers by pure size of production capacities. In contrast to this, Fig 2 shows that this is a false conclusion.
Following Germany, the three countries with the highest glass production (France, Spain and Italy) are barely even comparable in terms of funding volume.
Therefore, it is safe to say that Germany offers unique opportunities for glass manufacturers to receive financial support, especially when it comes to lowering the ordinary operating costs as well as investments to reduce CO2 emissions.
Fig 2. Comparison of funding awarded to overall production by countries.
(Source: “Energy saving options for industrial furnaces”, Fraunhofer Institute for Systems and Innovation Research, 2016.) For full size image, click here.
Unused funding potential for the glass industry
Pushing the analysis forward, it is interesting to take a look at the differences between manufacturing sectors within one Member State to estimate the overall performance of the glass industry within the competition for public funding.
To put this further into perspective, Fig 3 shows grant funding throughout all manufacturing industries in Germany.
The German glass industry, while being a major recipient of funding inside its own industrial sector in Europe, only plays a minor role in Germany compared to similar industries, such as paper, chemicals, or metals.
Especially fundings for energy efficiency projects play a crucial role. Other energy intensive sectors with comparable future challenges already receive significant state aid in this field, even though the funding landscape in Europe itself is per definition non-discriminatory.
Grants for energy efficiency investments and projects to lower CO2-emissions are designed to address all industries with equal opportunities.
Fig 3. German funding for manufacturing industries. (Green: Environment Protection and Energy/Resource Efficiency; Blue = R&D; Red = Regional Development; Grey = Aid for Small and Medium Enterprises.) For full size image, click here.
In this case, Germany is willing to give substantial financial support to meet its ambitious goals of carbon neutrality until 2045.
Reducing CO2 emissions in its biggest industrial emitters, the energy intensive industries, therefore represents one of the lowest hanging fruits for the short term and will play a vital role in the long run.
Due to this, large scale investments to reduce energy or resource consumption can receive substantial fundings of up to 60% of the capital expenditures.
This may not only support glass manufacturers in terms of liquidity but can also serve as a leverage in pushing forward efficiency projects, which otherwise would not be economically viable.
The glass industry can capitalise on expected short-term changes
Funding schemes pursuing the ‘state aid objective’ for environment protection and energy/resource efficiency are usually a good opportunity when it comes to saving resources or reducing the energy consumption.
But since the glass industry also produces significant process related emissions, it is of great interest to look at this specific topic in terms of funding.
In 2020, the German state launched a new funding programme to support corporations with their efforts to tackle these CO2 emissions.
Projects in this field typically include both, the development of new processes and the implementation of modern facilities, which is why large corporations are funded by up to 50% for the former and up to 40% for the capital expenditures.
Because decarbonisation is moving more into the focus of state aid, the current funding landscape is changing on a regular basis.
Apart from the already mentioned introduction of programmes to tackle specific topics, existing funding schemes are being updated to better fit the targets of the European Industry.
The General Block Exemption Regulation (GBER) is currently updated to enable generous funding for ‘state aid objectives’ related to decarbonisation, and more is still to come.
Consequences for glass
Taking all this into consideration, the European glass industry, although facing major challenges in terms of transforming its production processes on the pathway to carbon neutrality, can make use of powerful funding opportunities.
Today it can be said though, that even the biggest recipients of state aid, such as Germany, do not use these opportunities to their fullest potential.
Other industrial sectors with similar challenges are already one step ahead and could be a role model for the future.
Especially state aid objectives for environment protection and energy/resource efficiency should be kept in mind when working out the upcoming investment plans or strategic projects to reduce carbon emissions.
If used correctly, funding can already today become a major financial factor in terms of decarbonisation for the whole glass industry.
*Ayming, Dusseldorf, Germany
