Brussels proposes making public aid even more flexible to combat US and Chinese subsidies

In just over a week, on February 9 and 10, the 27 heads of state and government of the European Union meet in a extraordinary summit in Brussels to decide how to deal with the plans of “green subsidies & rdquor; of USA Y China that threaten the future of european industry and its competitiveness. Although the answer still divides the Twenty-seven, the European Commission plans to address the challenge from a fourfold perspective with two main focuses: making the rules even more flexible rules on public aid and the European regulatory framework and accelerating the deployment of financing, including a medium-term European sovereign wealth fund.

“Trade and competition in the zero-emissions industry must be fair and some of our partners’ initiatives may have undesirable side effects,” alerts the European Commission in the draft communication that the college of commissioners will adopt this Wednesday and that will feed the debate of the Twenty-seven. Brussels refers to Joe Biden subsidy plan that, through the inflation reduction law (IRA in its acronym in English) will mobilize 369,000 million dollars by 2032. But also to the beijing grants, which for a long time have doubled in terms of GDP those granted by the EU, have “distorted & rdquor; the market and have made the manufacture of a series of clean technologies is dominated by the Asian giant whose investments exceed 280,000 million dollars.

The European Commission starts from the diagnosis that the European zero emission industry is competitive but that massive foreign subsidies are unbalancing the playing field. This makes it necessary to “extend and accelerate & rdquor; access to financing, maintains the draft titled ‘an industrial blueprint for the green deal in the era of carbon neutrality’ and announced two weeks ago by the president Ursula von der Leyen. And this means continuing to make the state aid framework more flexible, a measure that Brussels has used on several occasions since the outbreak of the pandemic and Russia’s war in Ukraine to simplify support for renewable energy, for example.

state aid

The idea is to go one step further and allow member states to have greater room for maneuver when granting public public aid, simplifying and speeding up procedures, as advanced by the competition commissioner Margrethe Vestager earlier this month. For example, the plan contemplates extending the provisions to all renewable technologies, as well as renewable hydrogen and biofuel storage, eliminating the need for public tenders for less mature technologies, and extending deadlines to complete projects.

As for the public aid for the decarbonisation of industrial processes, the plan contemplates making the maximum aid limits applicable to each beneficiary more flexible. They will also allow Member States to create investment support schemes for the production of net strategic technologies, including the possibility of granting higher aid to producers to compete with similar schemes that may exist outside the EU, as well as tax breaks for attract new investment in the “zero emission strategic sectors”. Brussels is committed to acting quickly in the approval of aid, which currently has been 19 days, also European projects of common interest, and to “significantly increase & rdquor; State aid notification thresholds, to make it easier for Member States to introduce new subsidies.

European funds

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In addition to the state aid rules, Brussels proposes retouching the European regulatory framework based on a law on a zero-emissions industry that will be completed in the coming months with proposals on critical raw materials and the reform of the design of the European electricity market insistently demanded from Spain, as stated in the contribution to the debate submitted by the Spanish Government last week. The other major focus of the plan refers to the deployment of European financing, key, according to the Commission to avoid the “fragmentation of the single market & rdquor; given the different fiscal margin of the 27 (77% of the aid given corresponds to Germany and France).

The analysis suggests that the EU will need 477 billion euros in additional annual investments in the energy and transport system by 2030, including 170 billion euros in solar, wind, battery, heat pump and hydrogen production plants. Brussels plans to take even more advantage of the recovery plan, the InvestEU investment programthe fund for innovation and in the medium term create a european sovereign wealth fund to finance investment needs. As the Commission progresses, its intention is to present a proposal before summer 2023 as part of the review of the multiannual financial framework. The plan also contemplates the need to improve the resilience of supply chains and the skills of workers.

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