The Executive Vice-President of the European Commission, Margrethe Vestager, proposed on Friday 13 January the establishment of a Temporary Crisis and Transition Framework for State aid, in particular to counter the effects of the US Inflation Reduction Act (IRA).
The Executive Vice-President responsible for Competition Policy makes suggestions in a letter to EU Economy and Finance Ministers (see EUROPE 13099/10), who will discuss the IRA among other things on Tuesday 17 January (see other news).
If implemented, this framework will make it easier for Member States to subsidise renewable energy technologies and provide tax breaks for companies in strategic sectors, which risk diverting investment to third countries outside Europe.
Mrs Vestager warns that the competitiveness of European industry faces a number of challenges and that the US IRA “risks inducing some of our EU companies to move their investments to the US”.
Mrs Vestager proposes to change the ‘Temporary Framework for State Aid’, adopted in response to the war in Ukraine, into a ‘Temporary Crisis and Transition Framework for State Aid’.
According to her letter, the changes would make the calculation of the amount of aid simpler and the approval faster. In addition, the scope would be extended to cover “all renewable energy technologies”.
“I am considering specific provisions to support new investments in production facilities, including through tax relief”, writes Mrs Vestager, adding that these measures should be “limited in time, targeted at sectors where this risk [of investment diversion] truly exists and proportionate in terms of aid amounts”.
She also points out that, due to recent changes in the State aid rules and the General Block Exemption Regulation (GBER), Member States can already grant the majority of their State aid to companies without seeking the Commission’s approval.
The input received from Member States will be essential in helping the Commission formulate its response to the European Council’s calls to strengthen Europe’s economic resilience and global competitiveness while preserving the integrity of the single market, the Commission insists. These contributions will be followed by a formal consultation of the Member States in the coming weeks on a concrete proposal to modify the existing framework into a temporary crisis and transition framework.
The Commission takes up some of the ideas developed by France on the contours of a ‘Made in Europe’ strategy (in French: https://aeur.eu/f/4wg ): - extend the possibilities provided by the Covid-19 temporary framework; - allow temporary and targeted support, in the form of windows, for sectors that need it in the short term (for new industrial production capacity in a number of key sectors of the ecological transition); - raise the notification thresholds under the GBER; - provide for a derogation mechanism in the GBER for the most strategic projects.
A simplification shock. Bruno Le Maire, the French Minister, called on Monday for a new deal in European industrial policy, including a simplification shock. Important projects of common European interest (IPCEI) are useful, but too slow to materialise. France would like them to be validated in a maximum of 6 months. Mr Le Maire also said that State aid should be greater for sectors to be identified, citing hydrogen, electric batteries, solar panels and semiconductors. State aid should take the form of subsidies, but also tax credits, according to the French Minister.
On the other hand, Germany’s initiative to allow EU countries to further subsidise their industries has been met with opposition from experts and Member States, who fear that this measure would give Germany a competitive advantage.
Link to Mrs Vestager’s letter: https://aeur.eu/f/4w6 (Original version in French by Lionel Changeur)