Belgium, (Brussels Morning Newspaper) The European Commission’s plan to relax state aid rules to counter the US Inflation Reduction Act faces opposition from smaller bloc members.
Experts and smaller EU member states argue that cheaper and more effective solutions are available, adding that EC’s proposal would benefit Germany and France at the expense of other member states, according to Reuters reporting on Wednesday.
The IRA includes hundreds of billions of US dollars in subsidies for the green sector, with proponents of EC’s plan warning that green investors will move away from the EU and towards the US.
According to EC’s plan, bloc-wide state aid rules would be relaxed for the green sector until the end of 2025, with some bureaucratic obstacles temporarily removed.
Critics reminded that France and Germany accounted for nearly 80% of all state subsidies approved in the bloc under the Temporary Crisis Framework adopted in March last year.
“Let’s not sacrifice industry in 25 member states so the two richest ones can continue splurging,” one EU diplomat noted and added that potential effects of the IRA on green industries would be limited due to import tariffs and tax credits.
Potential downfalls
Milan Elkerbout, climate policy programme head at the Centre for European Policy Studies (CEPS), pointed out that the plan risks subsidising sectors that may necessarily move their production outside the EU.
“Sectors that need vast amounts of clean electricity and clean hydrogen will go where those resources will be cheapest – not always likely to be the EU,” he noted and added “this doesn’t mean that the EU will deindustrialise as specialised downstream industries may well maintain their EU presence as they are part of well-integrated value chains.”
BusinessEurope lobby group head Fredrik Persson echoed concerns of critics and added that the issue is complex.
“The answer needs to simultaneously address the push factors resulting from higher energy and regulatory costs as well as lengthy permitting procedures, and counter the financial pull factor created by the IRA,” he stressed.
“If the EU fails to deliver on all those aspects, we will lose even more ground on global competitiveness,” Persson concluded.
