EU green industry plan could spark ‘dangerous subsidy race’


The European Union proposed a plan to counteract the US inexperienced subsidy bonanza on Wednesday (1 February).

The plan, leaked on Monday, opens up room for particular person member states to subsidise clear expertise and, in emulation of the US plan, now additionally permits tax breaks for inexperienced industries.

However consultants warn this opens up the floodgates for a subsidy race between EU members, with wealthier international locations Germany and France vastly outspending smaller economies.

“The EU wants a critical European-level device right here to keep away from a harmful subsidy race [between member states],” stated Simone Tagliapietra, a senior fellow at Brussels-based assume tank Bruegel.

This difficulty is well-known amongst prime EU officers. France and Germany spent 80 p.c of the €672bn of state assist permitted by Brussels beneath the non permanent disaster framework arrange following the Russian invasion of Ukraine. Italy, which has a bigger industrial output than France, has solely allotted seven p.c.

In December, Ursula von der Leyen promised to arrange a brand new EU sovereignty fund to assist much less rich international locations match nationwide state assist given by Germany and France.

However the sovereignty fund was solely briefly talked about within the last textual content offered on Wednesday, with extra particulars on a possible fund solely following in June.

Within the meantime, member states can proceed to subsidise nationwide industries, doubtlessly deepening so-called fragmentation between international locations.

As a bridging resolution, von der Leyen proposes to recycle current funds for tax breaks. These funds can be utilized in much less rich international locations to meet up with Germany and France. However recycling outdated cash is “not passable,” stated Tagliapietra.

Commissioner for economic system Paolo Gentiloni, throughout a go to to Berlin on Monday, stated: “We can not use the identical cash for 25 totally different [goals].”

The cash earmarked to assist international locations like Italy cope with international clear tech competitors is identical cash beforehand allotted to cope with the power disaster, which was itself repackaged loans out of the pandemic restoration fund, which was arrange within the spring of 2020.

Gentiloni and inside market commissioner Thierry Breton have been robust advocates for brand new funds to cope with the difficulty of international competitors. However these efforts are met by a wall of opposition from the Netherlands, Denmark, Sweden, and Germany, the place finance minister Christian Lindner, of the liberal FDP, has spoken out strongly in opposition to new EU debt.

The fee proposal will function the premise for discussions by authorities leaders scheduled for subsequent week.

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