To counteract the negative effects of the US Inflation Reduction Act (IRA), Margrethe Vestager, executive vice-president of the European Commission, on Wednesday 1 February proposed new provisions for green investments in strategic sectors in Europe that are at risk of being relocated to the US or other third countries.
The Commission has launched a consultation of Member States on a draft proposal to transform the Temporary Crisis Framework into a Temporary Crisis and Transition Framework (see EUROPE 13111/16). The Commission will adopt the new framework in the coming weeks.
The Commission proposes:
- to make the calculation of aid simpler and the approval quicker;
- new provisions for green investments in strategic sectors that risk being relocated to the US or other third countries.
The aim is to facilitate the deployment of renewable energies and the decarbonisation of industry.
The Commission will adopt a revised General Block Exemption Regulation to increase the ceilings under which green aid can be granted without notification to the Commission and simplify the assessment of new ‘important projects of common European interest’.
It also proposes to broaden the scope of the temporary crisis framework to support all possible renewable energy sources. Member States can only support projects that are implemented within 30 months. “We now propose to extend this period by half a year, i.e. 36 months. This will allow more projects to be covered while maintaining the incentive to accelerate the deployment of renewable projects”, said Ms Vestager.
New investments. The second part of the proposals aims to promote investments to support production capacity for green technologies that are at risk of being relocated. “This is new. And this is a far-reaching, if temporary, change in state aid policy”, stressed Ms Vestager.
Some countries will be able to provide much more money than others. Therefore “we need to make sure that this opportunity is temporary, well targeted in its size and scope”. In terms of sectors, the new provisions will concern sectors affected by the IRA, such as batteries for electric vehicles, or wind turbines.
The Commission proposes higher percentages and ceilings for the less developed regions of Europe.
Another exceptional temporary option is matching aid. The aim is to help Member States to avoid investments being unfairly diverted to the highest bidder. It would allow Member States to match subsidies offered by third countries: if a company is offered $1 billion by a third country to support, for example, a new battery factory, an EU Member State could offer the same.
“This is, of course, a serious risk to competition and the integrity of our single market”, admitted Vestager. Indeed, recent figures show that Germany and France alone account for almost 80% of the state aid notified so far under the Temporary Crisis Framework.
This is why the Commission sets a number of conditions for this ‘matching aid’: how is the aid calculated, is the investment essential for the realisation of the ‘European Green Deal’, is the aid in the third country real? And, above all, do the other EU countries benefit?
Outside disadvantaged regions, aid should only be granted if the investment involves cooperation between different Member States.
The proposed changes should apply until 31 December 2025.
European Commission President Ursula von der Leyen said of the risk of a subsidy race that the important thing was that the support was “targeted, temporary, and relates to six clear areas” : batteries, solar panels, wind turbines, heat pumps, electrolysers and carbon capture, use and storage systems. The Commission also foresees the possibility of tax relief, she said.
See the Commission’s communication: https://aeur.eu/f/566 (Original version in French by Lionel Changeur, with Mathieu Bion)