Brussels expands the scope so that 27 is competitive and attractive for the sector. The European Commission has extended until December 31, 2025 the Temporary Crisis Framework (to which it now adds the Transition label) with which member states inject state aid to attract companies. Or that they won’t go to the US or China, which have opened a subsidy war. The community government also makes the conditions for granting these subsidies or tax exemptions more flexible and includes a novelty: the 27 will be able to match the offers that companies receive outside the EU.
Brussels proposes controversial change to state aid rules to boost industry against China and US
The intention is to prevent headlines such as that Volkswagen is considering bringing its future battery plant to the US for Inflation Reduction Act (IRA) benefits from becoming a reality. Thus, the European Commission authorizes Member States to provide greater support to companies “when there is a real risk of diversion of investments outside Europe”. “In these situations, member states can provide the amount of support that the beneficiary could receive for the equivalent investment in an alternative location or the amount needed to encourage the company to locate the investment in the alternative location in the European Economic Area, if it is cheaper. “, he said in a statement.
And what are the “exceptional cases” in which this flexibility would be allowed? To begin with, state aid flexibility is designed for key green transition sectors such as batteries, solar panels, wind turbines, heat pumps and electrolysers. In addition, the counter-offers have safeguards: they can benefit investments made in assisted areas, that is, those with less development and, therefore, access to regional funds (66.29% of Spanish territory) or those that are located in three Member States and in at least two assisted areas (one of them with a percentage of GDP below 75% of the European average). It will also require the beneficiary company to use the most environmentally advanced production technology and not encourage the relocation of investments within the EU.
“State aid rules, and in particular the Temporary Crisis Framework, have helped Member States to cushion the impact of the current crisis in Europe”, says the vice-president of Competition, Margrethe Vestager, in a statement on the flexibility that started temporarily due to the pandemic and was prolonged by the war in Ukraine, first, and competition from China and the US, later Our rules allow Member States to accelerate investments in ‘Zero Emissions’ at this critical time, while protecting a level playing field in the single market and cohesion goals,” he adds in a statement.
The easing of state aid has generated distrust within the EU due to fears that the single market will break up. Vestager herself warned that Germany and France concentrate almost 80% of the subsidies granted in the Temporary Crisis Framework. Of the 672 billion euros in national grant schemes approved by Brussels under the emergency rules, “53% of approved state aid was notified by Germany, while France represents around 24%”, says a letter sent to ministers.
The easing of state aid is the first stage of the package that the EU is preparing for commercial competition centered on the ecological transition as a result of the subsidies announced in the USA and it was announced the day before that the President of the European Commission, Ursula von der Leyen, will meet in Washington with Joe Biden. “The new Zero Emissions law for the sector will identify clear objectives for European clean technology by 2030. The objective will be to focus investments on strategic projects that cover the entire supply chain”, said the German about the second stage of this proposal.
The third element is the reform of the electricity sector. According to the outline provided by Context, Brussels’ intention is to limit intervention in prices to cases of energy crises. It also intends to promote long-term contracts. The fourth point is to increase the extraction, refining and recycling of strategic raw materials in the EU to gain autonomy. The objective is to “reduce by more than half” the time to obtain a license to extract them, which today is up to five years, in addition to reducing bureaucracy by creating a single window, as explained in a note by Inside market commissioner, Thierry Breton.
“Europe has to maximize the use of its limited but not insignificant resources. Europe represents less than 3% of the global operating budget and half comes from three Member States: Finland, Sweden and Spain. If we want to cover a part of our needs with domestic capacity, we have to reverse this trend”, she added. However, in Brussels they know that there will be no self-sufficiency on the continent, but they aspire to cooperate with what Von der Leyen named the Critical Raw Materials Club, to which he invited countries like the United States or Ukraine.