The European Commission is keeping its promise to further relax state aid rules. The objective of this opening is to prevent green industry companies from relocating to the United States and thus preserve the Union’s ability to compete on the world stage.
After the invasion of Ukraine by Russia, the Commission had already untied the lines to make it easier for Member States to inject public funds into companies in difficulty and support households.
More Washington’s approval last summer of the Inflation Act (Inflation Reduction Act) pushed the European institution to extend this flexibility. It even extends its scope to protect national companies needed to fight climate change.
The American plan provides over the next 10 years an envelope of 369 billion dollars in the form of tax credits and direct rebates to help companies increase the production of clean technologies. But Washington sets a condition, these products must be essentially manufactured in North America.
The European Union considers this provision to be discriminatory, unjust and illegal. She fears that this announced support will trigger an industrial exodus across the Atlantic.
With this in mind, the Commission has adapted state aid rules to simplify the approval of subsidies in six key areas: batteries, solar panels, wind turbines, heat pumps, electrolysers (necessary for obtain green hydrogen) and carbon capture technology. It extends its review to the production of the components and raw materials needed to manufacture these products.
The new procedures will allow Member States more leeway to inject public funds – in the form of grants, loans or tax credits – with the aim of supporting the development of green technologies, essential for reduce greenhouse gas emissions and achieve climate neutrality by 2050.
In cases where the risk of relocation is high, member countries will be able to match subsidies offered by a non-European government, such as the United States, and keep the company within EU borders.
The new rules will apply until the end of 2025, but payments can continue thereafter.
Although they are not mentioned by name, these safeguard measures seem intended to prevent Germany and France from continuing to accumulate subsidies in favor of their national industries.
The two countries accounted for 77% of the €672 billion in programs approved in 2022. The figure has led other countries to urge the Commission to tread carefully before easing aid rules further. State.
Margrethe Vestager, Vice-President of the European Commission, points out that these changes will be “proportionate, targeted and temporary“.
However, when she first presented the changes in early February, the Danish official warned that the use of taxpayers’ money to benefit selected companies “only makes sense if society as a whole benefits“.
“Using state aid to set up mass production and to match foreign subsidies is something new“, then specified the Vice-President of the Commission. “And it’s not innocent.“
