To protect European industry from a potential distortion of international competition, Internal Market Commissioner Thierry Breton is working on measures “similar” to far-reaching US climate subsidies. “We must react, we must not give up,” Breton said on Tuesday during a working visit to Madrid. “It’s not too late. We need to send a strong signal to our industry.”
European circles have been concerned for months about the impact of the US Inflation Reduction Act (IRA), passed last summer. That plan, worth 420 billion dollars (about 392 billion euros), provides green subsidies for American companies that, for example, produce electric cars or are active in the renewable energy sector. On the EU side, there are fears that the international level playing field will be undermined or that companies will turn their backs on Europe and establish themselves in the United States.
The Commission is preparing a European counter-proposal, Breton reiterated. In his own words, he is “working to be able to offer something similar”. Time is running out, says the Frenchman. “Every day I get examples of companies that stop investing in Europe.”
“Unacceptable obstacle to trade”
According to him, one of the main sore points of the American plan is the subsidy which can amount to 7,500 euros for the purchase of an electric car manufactured in the United States, Mexico or Canada. According to Breton, this measure creates an “unacceptable barrier to trade” which goes against the rules of the World Trade Organization (WTO). He recalled that Europe is already in talks with the United States.
The European response will consist of three parts. Firstly, a regulatory part, which should stimulate the development of the green technology industry in Europe, secondly, a financial part to give all Member States access to the necessary investment resources and, finally, the creation of a fund for investment projects.
The first two strands will be presented to the European heads of state or government at the summit on 9 February, organized precisely to discuss concrete European initiatives. The investment fund should be finalized during the second half of the year.
Non-aligned Europe
Commission President Ursula von der Leyen has already announced measures to restore the competitive balance in early December. You have suggested, among other things, a temporary relaxation of state aid rules, but Belgian Prime Minister Alexander De Croo (Open Vld) is wary. “The common market is our greatest asset and we must safeguard it,” he said. You are more in favor of the proposal to set up the new green roof fund, which France also agrees with. Germany, on the other hand, wants to focus more on dialogue with Washington.
It is up to the Commission to bridge the gap between the Member States.
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