Monday

25th Sep 2023

EU aims to simplify tax credits to counteract US green subsidies

  • EU competition commissioner Margrethe Vestager warned the loosening of state aid rules could result in unfair advantage for some member states (Photo: European Parliament)
Listen to article

The European Union is set to propose a plan to counteract the US $369bn [€339bn] Inflation Reduction Act on Wednesday (1 February), with looser state-aid rules for tax credits in green investments.

The EU Commission has drafted plans to simplify and speed up companies' access to tax credits in an effort to prevent companies from leaving the EU.

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

Large wind and solar developers have criticised the EU funding regime for being too complicated and have pointed out that tax incentives in the US trigger automatically, making them more attractive.

To address this, the commission has built a plan to simplify rules allowing speedier approvals for projects of common European interest. It also suggests setting hard targets for green industrial capacity by 2030, creating a clearer sense of direction.

According to the commission, the industrial sector needs to invest €170bn by 2030 in manufacturing plants to produce solar, wind, batteries, heat pumps, and green hydrogen.

To help businesses get to this figure, the commission wants to propose a temporary crisis and transition framework that would allow for greater aid for more crucial clean technologies and renewable energy, going beyond what the EU's current state-aid rules allow.

Part of the plan is to increase the threshold of the so-called "block exemption", making it easier for governments to subsidise hydrogen production, carbon capture technology, energy efficiency and electrification of transport.

Looming debt debate

The move, however, could raise controversy within the EU as wealthier countries such as Germany could end up outspending fiscally-stretched countries in the south.

Germany and France accounted for just under 80 percent of state aid given since the pandemic when the rules were previously loosened, whereas Italy, Europe's second-biggest industrial producer after Germany, has only allocated four percent.

Competition commissioner Margrethe Vestager in an op-ed co-authored with trade commissioner Valdis Dombrovskis and green deal commissioner Frans Timmermans last week, warned that a "massive surge in subsidies when countries have different financial means will only risk fragmentation."

Spain Italy and France have all called for EU borrowing to help countries with less fiscal space make the same investments in renewables and critical technologies.

Economy commissioner Paolo Gentiloni, who is in Berlin to discuss European competitiveness, has also signalled strong support for new joint debt. Commission president Ursula von der Leyen has said she would propose a European Sovereignty Fund by the middle of this year.

But Dutch negotiators and finance ministers of Finland, the Czech Republic, Denmark, Estonia, Ireland, Austria and Slovakia warned against "permanent or excessive non-targeted subsidies," with the Netherlands especially opposed to new joint debt.

French president Emmanuel Macron, in a last-ditch effort ahead of next week's EU council meeting, is trying to gain support for a robust 'buy European' approach from Dutch prime minister Mark Rutte and is expected to hold a joint press conference on Monday evening.

Analysis

Why is petrostate UAE going all in on green hydrogen?

The United Arab Emirates announced its ambition to become one of the world's premier trading hubs for green hydrogen. Interesting, to say the least, for a country that relies on the sale of fossil fuels for its prosperity.

Latest News

  1. Europe's energy strategy: A tale of competing priorities
  2. Why Greek state workers are protesting new labour law
  3. Gloves off, as Polish ruling party fights for power
  4. Here's the headline of every op-ed imploring something to stop
  5. Report: Tax richest 0.5%, raise €213bn for EU coffers
  6. EU aid for Africa risks violating spending rules, Oxfam says
  7. Activists push €40bn fossil subsidies into Dutch-election spotlight
  8. Europe must Trump-proof its Ukraine arms supplies

Stakeholders' Highlights

  1. 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.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. 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
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

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

Join EUobserver

Support quality EU news

Join us