The European Commission has definitively approved this Thursday its new Crisis and Transition Time Frame in terms of national public aid, whose objective is to offset the massive subsidies to the green industry for a value of 370,000 million dollars that the Inflation Reduction Law promoted by the White House of Joe Biden. The relaxation of the rules will be in force until December 31, 2025.
Its main novelty is that the Community Executive will allow European governments to match the subsidies offered by the United States in order to stop a business flight. The first known case is that of Volkswagenwhich has just announced that it is halting a planned battery plant in Eastern Europe and giving priority to a similar factory in the United States after estimating that could receive 10,000 million euros in Washington incentives.
This type of help is limited to a very restricted list of sectorswhich according to Brussels are “those most at risk of being lured” to the United States by the Inflation Reduction Act. It concerns the production of batteries, solar panels, wind turbines, heat pumps, electrolyzers, and carbon capture and storage, as well as obtaining the related essential raw materials necessary for the production of the corresponding equipment.
(Brussels relaxes rules to give Next Generation funds to green industry)
In addition, this option is subject to all a series of safeguards in order to limit distortions of competition. Firstly, it can only be used for investments in regions receiving cohesion funds, which in the case of Spain cover 66.29% of the population; or involving projects located in at least three Member States (with a significant part of the total investment in at least two assisted areas).
Second, the beneficiary must use state-of-the-art production technology from an environmental and emissions point of view. Finally, the help may not be used to attract investment from other Member States.
The Community Executive admits that the reform could lead to a “race for subsidies” between the EU and the US in which the highest bidder is the one who keeps the investment. However, he maintains that the fact that the grants available in Washington are public and known and that proof of flight risk is required will serve to minimize this problem.
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