The European Union is attempting to go toe-to-toe with the United States’ $369 billion Inflation Reduction Act with a range of tax relaxations and new industrial benchmarks for 2030, Commission President Ursula von der Leyen announced Wednesday.
While “subsidies abroad are unleveling the playing field,” the Commission communication says, the EU wants to revise state aid rules to allow countries to offer more targeted support for green industries, as part of a new Green Deal Industrial Plan.
The Commission recommends redirecting existing funds toward a series of new “net-zero” benchmarks for 2030 by offering tax breaks for clean-tech investments. A European sovereignty fund will be unveiled in the summer.
“We have since long argued that the fight against climate change is a must. A must for our planet, a must for our economic prosperity, and a must for our strategic independence,” von der Leyen said. “We need competition.”
A new temporary crisis and transition framework will simplify state aid rules for renewable energy deployments and for decarbonizing industrial processes. The EU plans to also raise state aid notification thresholds for certain sectors as part of reforms to its general block exemption regulation (GBER).
The GBER rules allow countries to bypass the obligation to notify Brussels of state support. More than 90 percent of all state aid across the EU is distributed under this exemption scheme. The Commission on Wednesday launched a consultation with EU nations on the plans.
The new efforts will be at the front and center of talks between EU leaders on February 9 and 10, as the bloc charts a response to Washington’s huge green-subsidy program, which Europe fears could drive business across the Atlantic.
But a range of EU members have warned against too heavy a revision to the bloc’s state aid framework. Emergency subsidy rules have gone through a series of revisions since the pandemic, and throughout the war in Ukraine.
Last week, the finance ministers of Finland, the Czech Republic, Denmark, Estonia, Ireland, Austria and Slovakia sent a letter to Executive Vice President Valdis Dombrovskis, criticizing what they call “permanent or excessive non-targeted subsidies” in response to the U.S.’s moves.
