EU reveals plan to fight US green subsidies, compete with China

The EU is racing to compete with the US and China to avoid businesses moving to Asia or North America, where energy

The EU is racing to compete with the US and China to avoid having businesses relocate to Asia or North America, where energy costs are cheaper.

The EU on Wednesday announced proposals including easing controversial state aid rules to counter the threat to European industry from US green subsidies and unfair competition. healthy from China.

The bloc is racing to compete with the United States and China to avoid businesses moving to Asia or North America, where energy costs are cheaper, but EU member states are divided over how. cope with.

European Commission President Ursula von der Leyen outlined the bloc’s proposals, which were welcomed by France and Germany, but said there would be no immediate new EU funding.

“We need to work with what we have right now,” she said.

Much of the EU’s response involves a repackaging of existing funds — a much-criticized gap-filling measure — that would cost around 250 billion euros ($270 billion) for the green transition.

“What we are looking at is that we have a level playing field in the global competition,” said von der Leyen.

She left open the possibility of a new EU fund in the future.

But that idea has been strongly opposed by a number of member states including Denmark and the Netherlands, which oppose throwing new money at the problem or ramping up borrowing to solve the problem.

“If you have state aid, the other side of the coin has to be funded at the EU level,” von der Leyen told a news conference.

The new measures provide flexibility in providing aid to companies in the green and renewable energy sectors as well as those involved in the decarbonisation of the industry.

There will also be tax breaks for companies in strategic sectors to zero.

Dialogue with America

The package is a response to a landmark US spending bill last year that channeled $370 billion into subsidies for the US energy transition, including cutting reduced tariffs on electric cars and batteries made in the United States, much to the dismay of European manufacturers.

European countries cannot help but worry about parts of the Inflation Reduction Act (IRA) that offer lavish benefits to electric car buyers in the US if they “Buy American”.

EU internal market commissioner Thierry Breton said 350-400 billion euros are needed to compete with other countries, meaning a shortfall of about 100 billion euros compared to the announced amount.

EU officials have urged their US counterparts to provide exemptions for the bloc's businesses

EU officials have called on their US counterparts to provide exemptions for the bloc’s businesses.

The EU’s response comes as member states disagree on how best to protect European businesses and fear sparking a trade war.

While countries like France favor loosened state aid rules, others argue that only wealthier member states can help their companies and thus fragment single market.

However, EU competition chief Margrethe Vestager insisted Brussels would act carefully and that the relaxation of state aid rules would be “temporary, clearly targeted”.

“Any action we take must protect the integrity of our single market,” she said.

German Economy Minister Robert Habeck said the plan was “very good” and his French counterpart Bruno Le Maire welcomed “strong proposals”.

The two ministers will travel to Washington on February 7 to “discuss the impact of the IRA on European industry,” a source at the French Economy Ministry said on Wednesday.

Germany and France accounted for 53 and 24% of state aid notified to Brussels, respectively, since March 2022 when rules were relaxed following the war in Ukraine.

The EU is pushing the US to exempt European companies. But a joint task force set up to address Brussels’ concerns has yielded little results.

‘Predictions are disappointing’

EU leaders will debate the proposals at next week’s Brussels summit and final decisions on the bloc’s response are expected in March.

German MEP Markus Ferber described Wednesday’s proposals as “old wine in new bottles” and “predictably disappointing”.

Last month, Von der Leyen criticized China’s “aggressive efforts” to persuade European clean-tech companies to relocate and take advantage of cheaper labor and more permissive regulations.

Environmentalists have criticized the EU plan, saying the measures are not effective enough.

“Green subsidies are good but not enough to have a meaningful impact on climate,” said Luke Haywood, head of climate policy at the European Environment Agency.

“Without cutting fossil fuel subsidies, pricing carbon properly, and putting in place measures to reduce demand, these financing efforts will be meaningless.”

© 2023 AFP

quote: EU reveals plan to combat US green subsidies, China competition (2023, February 1) accessed February 2, 2023 from 2023-02-eu-unveils-counter-green-subsidies.html

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