29th Sep 2023

Swedish EU presidency: 'Subsidy not answer' to US green protectionism

  • Some EU leaders fear industries attracted by the new giant US subsidy scheme, the Inflation Reduction Act, may leave for the other side of the Atlantic (Photo: European Commission)
Listen to article

US president Joe Biden's $369bn [€341bn] green subsidy package dominated the European political agenda this week as Sweden took over the EU's six-month rotating presidency.

As one of the bloc's most ardent free-market guardians, the Scandinavian country was scrambling to defuse ever more explosive calls for equally big EU state subsidies to match the US offer under the Washington's Inflation Reduction Act (IRA).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Speaking at a conference in Stockholm on Tuesday (11 January), Swedish EU affairs minister Jessika Roswall suggested the best way to deal with US competition is by "deepening the single market and supporting free trade."

"There is a correlation between free trade and productivity," she said. "A subsidy race is not the answer."

The EU Commission on Wednesday presented new regulation which requires companies to notify the EU executive of non-EU subsidies, which will help the bloc protect European businesses from unfair competition.

But this does not prevent businesses from leaving for the other side of the Atlantic if conditions are more attractive.

France and Germany have vowed to retaliate against the US plan with their own subsidies. French commissioner Thierry Breton has been on a whirlwind tour of EU capitals this week to win support for more EU funds and looser state-aid rules.

This would allow individual member states to ramp up their green subsidies and protect their industries against foreign competition.

Sweden's prime minister Ulf Kristersson this week made it clear that, as an open and export-dependent economy, it was in Stockholm's interest to bolster free trade, which he described as one of Europe's "core values."

But fearing an industrial exodus, the political momentum has shifted in favour of protectionism and EU Commission president Ursula von der Leyen promised to come up with a proposal to relax European state-aid rules.

Presented with the political reality, Roswall admitted it might be legitimate to "temporarily" loosen the rules given the threat IRA poses to EU industries but said subsidies should be a "short-term" solution.

Danish EU commissioner for competition Margrethe Vestager, also coming from an open economy dependent on foreign trade, warned against subsidy overkill and said in December that "competitiveness can't be built out of subsidies."

But state-aid rules were already "temporarily" relaxed following the Covid-19 pandemic and extended when Russian president Vladimir Putin invaded Ukraine.

A further extension may be here to stay, even if administered by a reluctant Swedish presidency.

Although it is estimated $369bn will flow into clean technologies suggesting a clear-cut plan, the IRA provides unlimited tax credits to households for everything from electric vehicles to solar panels and heat pumps—meaning the legislation is essentially open-ended.

Von der Leyen is expected to present a proposal for state aid rules at next week's World Economic Forum in Davos, Switzerland.

EU updates rules to pump more state aid into green projects

The European Commission unveiled new guidelines to incentivise public investment in green climate and energy projects, ending subsidies for the most-polluting fossil fuels. But natural gas projects will still be eligible for public funds under certain conditions.


More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?


How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. EU women promised new dawn under anti-violence pact
  2. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  3. Punish Belarus too for aiding Putin's Ukraine war
  4. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  5. EU states to agree on asylum crisis bill, say EU officials
  6. Poland's culture of fear after three years of abortion 'ban'
  7. Time for a reset: EU regional funding needs overhauling
  8. Germany tightens police checks on Czech and Polish border

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Join EUobserver

Support quality EU news

Join us