In order to facilitate the huge investments in the ‘net zero’ economy, the European Commission is focusing on reorientating and making existing EU financial tools, such as the Next Generation EU Recovery Plan, more flexible, without however excluding the creation of a European Sovereignty Fund in the medium term, if an in-depth analysis confirms the need for it.
“At the moment being, we need to work with what we have right now and focus it on the clean-tech industry”, said its president, Ursula von der Leyen, presenting the Green Deal Industrial Plan to the press on Wednesday 1 February (see EUROPE 13112/1). She mentioned the possibility of amending the national recovery plans under Next Generation EU to include ‘REPowerEU’ chapters (see EUROPE 13084/151) and a possible increase in resources for the InvestEU programme and the climate change Innovation Fund.
On Wednesday, the EU institution unveiled guidance on how member states can modify their recovery plans to adapt them to the emerging clean tech race.
Presented in May 2022, the ‘REPowerEU’ strategy initially aimed to reduce the EU’s dependence on Russian hydrocarbons by diversifying supplies and accelerating investment in cleaner energy.
While the deadline of 2027 had been mentioned for a while, “we have already completely got rid of Russian fossil fuels”, Ms von der Leyen said. “We therefore have the opportunity to redirect additional funding from the REPowerEU strategy to ‘net zero’ technologies”, she added, estimating this additional funding at “€250 billion” (including €225 billion from the Next Generation EU ‘loan’ component).
To that end Ms von der Leyen said we will allow Member States to grant ‘tax credits’ to stimulate the development of clean technology investment projects in national recovery plans.
Suggested changes to the EU state aid framework (see EUROPE 13112/3) will alter the way EU money can be allocated to support the development of ‘net zero’ value chains, an insider source added.
In its guidance, the Commission invites Member States to present the revision of their recovery plan, by the end of April at the latest, which will have to be agreed at European level, and to indicate as soon as possible whether they intend to call on the loan envelope allocated to them under Next Generation EU. This review should describe the ‘REPowerEU’ labelled projects (infrastructure to secure energy supplies, investments in energy efficiency and sobriety, production of renewable energy, hydrogen, measures to accelerate the decarbonisation of industry) already underway or that can be finalised by 2026.
See the Commission’s guidance: https://aeur.eu/f/56b
A European sovereignty fund still vague in outline
This approach to mobilising and even building on existing European financial instruments is, according to Ms von der Leyen, a “bridging solution” to other future financing tools.
The Commission President confirmed that she wants to present “a European sovereignty fund” to increase the means available for research, innovation and industrial projects of a strategic nature (“artificial intelligence and quantum computers”), so that support is spread across the EU. This initiative is expected to take place in the context of the mid-term review of the EU budget scheduled for the summer.
However, Ms von der Leyen did not give any details on how such a fund would work or when it would be set up, stressing the importance of first studying “the needs and the issues” with the Member States before focusing on funding techniques.
Asked why the Commission was not proposing to set up a new common debt instrument along the lines of SURE, the President said that the current situation was now “different” to that experienced during the Covid-19 pandemic, when many workers were at risk of losing their jobs due to pandemic lockdown.
For his part, the Commission’s executive vice-president, Valdis Dombrovskis, argued that investment in the ‘net zero’ industry would come mainly from the private sector. He advocated making real progress in the development of capital markets. “The EU is still far behind the US, where innovative start-ups thrive on venture capital”, he said.
See the Commission communication: https://aeur.eu/f/566 (Original version in French by Mathieu Bion)