To protect European industry from a possible distortion of international competition, Internal Market Commissioner Thierry Breton is working on measures “similar” to the far-reaching US climate subsidies.
“We have to react, we can’t stand by,” Breton said during a working visit in Madrid. “It is not too late. We have to send a strong signal to our industry.”
European circles have been concerned for months about the impact of the U.S. Inflation Reduction Act (IRA), passed last summer. The $420-billion plan provides green subsidies for U.S. companies producing electric cars or operating in the renewable energy sector, for example.
There are fears on the EU side that the international “level playing field” will be compromised or that companies will even turn their backs on Europe and relocate to the US.
An "unacceptable trade barrier"
The Commission is preparing a European counterproposal, Breton reaffirmed. He said he was “working hard to be able to propose something similar" to the IRA. Time is running out, the Frenchman said, noting that he receives daily examples of companies that stop investing in Europe.
One of the main pain points in the U.S. plan is the subsidy of up to €7,500 for the purchase of an electric car produced in the U.S., Mexico or Canada. That measure creates an “unacceptable trade barrier” that goes against World Trade Organization (WTO) rules, Breton argued.
Europe is already in talks with the US, according to the Commissioner, who said the European response would have three parts: a regulatory component to encourage the development of the “green tech” industry in Europe; a financial component to give all member States access to the necessary investment resources; and a fund to invest in European industrial projects.
The first two components will be presented to European heads of state and government at their summit on 9 February, organised precisely to discuss concrete European initiatives.
Discussions continue on measures to restore competitive balance
The investment fund should be fleshed out during the second half of the year.
Commission President Ursula von der Leyen had already announced measures to restore the competitive balance in early December. Among other things, she suggested a temporary relaxation of state aid rules.
However, Belgian Prime Minister Alexander De Croo is wary of this. “The common market is our greatest asset and we must safeguard it,” he said. He is more in favour of the proposal to mobilise a new green fund, something France also agrees with.
Germany, on the other hand, wants to focus more on dialogue with Washington.
It will be the Commission's job to bridge that gap.
