The European Union already has its response to the US Inflation Reduction Act and China's huge subsidies on clean and green technologies. The president of the Community Executive, Ursula von der Leyen, yesterday presented her plan to invest massively in the sector, in which one of the main points is to relax State aid.
The law of inflation in the United States, with a massive plan of 370,000 million dollars in subsidies, and a plan of 280,000 million dollars by China for the next five years have awakened Europe. You cannot be left behind or you will lose competitiveness.
Known as the green deal industrial plan, the European Commission will make it easier for governments to offer subsidies, including tax breaks to companies and help to invest in green technologies, such as the deployment of renewable energy and decarbonisation. States will be able to use, for now, money already available. Like the recovery funds, especially the money that has not yet been requested. Also part of the RepowerEU budget (a fund of 225,000 million euros that seeks to disconnect from Russian energy through investment in renewables) and the InvestEU plan, which mobilizes private capital and financing from the European Investment Bank (EIB).
These measures will be complemented by a further relaxation of State aid and extend the current exceptions, applied since the invasion of Ukraine, until 2025. A temporary measure that can only be applied to sectors affected by US law, among which includes electric vehicle batteries, solar panels, wind turbines and heat pumps. To avoid one of the biggest European fears, that community companies go to the United States for tax benefits, it will be allowed to equalize the level of subsidies that the sector receives in a third country and thus avoid relocation.
What it is about is to simplify the entire process to speed up the deployment of renewables and their investment, and allow aid focused on key clean technology projects. In addition, the amount of public aid that countries will be able to grant will be increased, without having to go through a complex procedure and that does not require the approval of Brussels.
The measure, however, is not without risk, admitted the vice president in charge of Competition, Margrethe Vestager, who promised "a balance" to prevent countries with greater fiscal capacity from being the most benefited from the new temporary framework. In recent months, France and Germany have been the countries that have injected the most public money since the invasion of Ukraine. Both are responsible for 77% of public money mobilized, according to Vestager's admission.
Continuing like this could result in a fragmentation of the single market, which would be throwing stones at one's own roof. For this reason, and to prevent countries with less fiscal space from being left behind, Von der Leyen is committed to the creation of a sovereign wealth fund, whose proposal is expected in June, to invest in cutting-edge industries such as artificial intelligence and biotechnology.
Von der Leyen avoided answering what the total amount of the fund could be, nor its financing. Despite the fact that commissioners such as the one for the Economy, Paolo Gentiloni, or the one for the Internal Market, Thierry Breton, have supported the issuance of joint debt as a possibility, several countries —such as the Netherlands— have already rejected this option.
Likewise, the president of the community executive advanced that in mid-March, the Commission will present a zero-emissions industry law, which, like the chip law presented last year, will focus on increasing the production and manufacturing of key products for climate transition, such as electric batteries.
“The shape of the zero-emissions economy and where it will be located will be decided in the coming years, and we want to be an important part of this industry that we need globally,” von der Leyen argued.
According to calculations by the European Commission, the world market for clean technologies will triple its value by 2030, to 600,000 million euros. The European industry related to zero emissions mobilized 100,000 million euros in 2021, but the sector will continue to grow and Europe, despite being a pioneer in approving a climate law, may be left behind. “A paradox”, argued Vestager, which Brussels hopes to correct with its new plan.
