On Monday 8 January, the European Commissioner for Competition, Margrethe Vestager, and the German Vice-Chancellor and Minister for the Economy and Climate Action, Robert Habeck, announced that the European Commission had authorised a German measure worth €902 million to support the construction of a battery production plant for electric vehicles by Northvolt in Heide (Germany). The aid will take the form of a direct grant of €700 million and a guarantee of €202 million.
According to Commissioner Vestager, the aim is to develop the greenest batteries possible, with the lowest CO2 emissions.
The plant will have an annual capacity of 60 GWh, enough to power 800,000 to 1 million electric vehicles a year, according to the Commission. Production is scheduled to begin in 2026 and to reach full capacity in 2029.
An initial application of the “matching”, aid option
The aid was authorised under the temporary crisis and transitional framework for state aid. More specifically, this is the first aid approved under the so-called “matching aid” scheme. This temporary option, which is exceptional in nature, is designed to help Member States prevent investments from being diverted to the highest bidder outside Europe. When a third country (the United States in this case) offers a company a certain amount of aid for an industrial project, a Member State can offer the same amount up to the difference in funding.
However, Commissioner Vestager stresses that the Commission ensures that aid in this context too is appropriate, proportionate and limited in order to achieve its aim.
For Ms Vestager, it is a question of pragmatism. The Commissioner pointed out that the American Inflation Reduction Act (IRA) allowed the United States to provide numerous subsidies and that, according to internal Northvolt documents, if Europe had not acted, the investments would have been made in the United States.
According to Robert Habeck, Northvolt was initially interested in investing in the German site, negotiations were deepened, but then, with the introduction of the IRA, the United States tried to attract these investments on its territory.
According to Robert Habeck’s information, the aid authorised on the European side does not quite coincide with the American promises of subsidies: the subsidies proposed by the United States would have been higher than the amounts of aid approved at European level. This would indicate a willingness on the part of companies to invest in Europe.
However, Mr Habeck stressed that investment partnerships could be useful in avoiding a subsidy race. Such competition would increase costs for both blocs.
In this context, Commissioner Vestager also mentioned cooperation within the EU-US Trade and Technology Council (TTC) on microprocessors, and the dialogues on subsidies in the context of the IRA.
Distortions of competition within the internal market?
Ms Vestager also announced that the European Commission “will soon be ready” with figures for the sums disbursed under the temporary framework, in order to determine whether this distorts the level-playing field within the internal market. “What I can say now from the numbers is that we do see that other Member states also have substantial state aid schemes and do pay out sums that in a relative terms are comparable to what we see Germany doing”, said the European Commissioner.
For Mr Habeck, the real competition is not within the internal market, but between the EU, China and the United States. He felt that these were investments in European economic security. (Original version in French by Émilie Vanderhulst)