President of the European Commission, Ursula von der LeyenThe European Commission has proposed that state aid could be granted to support European industry's transition to green energy, while the US and Chinese economies receive substantial subsidies, AFP reports.
Apart from subsidies, the EC's proposals for moving towards an environmentally friendly economy mainly concern redeployments of existing resources, basically a "repackaging" of some measures, which is likely to generate criticism.
"For now, we have to work with what we already have" and channel this money into clean technologies, said Ursula von der Leyen. However, she left open the possibility of setting up a European sovereign wealth fund, to be proposed before the summer, which would "in the medium term" allow investment in research or in the capital of strategic companies.
The Commission's plan provides for greater flexibility for Member States in terms of granting aid to companies involved in renewable energies (solar, wind, etc.) and decarbonisation of industry (hydrogen, electrification, energy efficiency, etc.). Certain investments in new installations could be supported through "tax breaks".
Brussels is considering new legislation that will allow production targets to be set in key sectors for European sovereignty, support projects involving several European countries, and speed up and simplify authorisations and financing.
French Economy Minister Bruno Le Maire welcomed the "firm proposals", which are in line with what Paris wants. His German counterpart welcomed "a very good proposal".
The two leaders will travel to Washington on 7 February to negotiate adjustments to the $370bn protectionist support plan decided by the US administration last summer. The US plan is putting pressure on European industry, which has been suffering for years from unfair Chinese practices and faces rising energy bills after losing access to cheap Russian gas because of the war in Ukraine.
Ursula von der Leyen's package of measures is an attempt to respond to these challenges, although it is controversial among the 27 member states and within the Commission itself.
The "straitjacket" of domestic subsidies was already weakened at the start of the pandemic in 2020. Further opening up to subsidies risks benefiting the big rich countries, especially Germany and France, which could excessively favour their companies at the expense of their EU competitors.
"Any measure we take must preserve the integrity of the single market," Competition Commissioner Margrethe Vestager stressed, saying the relaxations would be "temporary" and "targeted
To mitigate the risk of fragmentation of the internal market, some countries, led by France and Italy, calls for new pooled funding, such as the sovereign wealth fund. "If you have state aid, it has to go hand in hand with funding at EU level," admitted president von der Leyen.
This idea is rejected but by several countries, such as Germany, Netherlands and Swedenwho are hostile to any increase in their contribution to EU budget. "You can make economic policy without spending money," German Finance Minister Christian Lindner said this week.
Internal Market Commissioner Thierry Breton estimates that the EU may need to mobilise €350-400 billion to help set up clean technology factories in Europe (batteries, solar panels, etc.). Compared to the resources currently available, there could be a gap of €100 billion, which he says shows that new pooled funding, such as a sovereign wealth fund, needs to be considered.
In the short term, the Commission is counting on mobilising existing funds, notably under the €800 billion European Recovery Plan (NextGenerationEU), with possible redeployments, to increase the share currently allocated to the green transition (€250 billion).
"The Commission's proposal is nothing more than old wine in new bottles," commented Markus Ferber, a German conservative MEP.
"The Commission's plan is necessary but not sufficient," said French MEP Valérie Hayer (Renew group), "contenting ourselves with budgetary recycling will not allow us to achieve real sovereignty," she said.