The EU must subsidise its green technology sectors in order to compete with the US, said Commission chief Ursula von der Leyen in a speech on Sunday at the College of Europe in Bruges.
Simpler and more flexible state aid rules are needed as well as new EU funds for investment, Von Der Leyen said, adding that a trade war with the US should be avoided.
The speech came as Von der Leyen's first fleshed-out response to US President Joe Biden's Inflation Reduction Act (IRA), a green energy subsidies package.
EU lawmakers are concerned that the $430 billion bill, which provides tax breaks for US companies, will put EU companies at a disadvantage in industries ranging from car manufacturers to producers of green technology.
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During her speech, Von der Leyen honed in on the EU state aid rules system being used to support Europe's industrial policy. Moreover, she floated ideas for new EU funds for investment to come from an existing RePowerEU fund as well as a new European Sovereignty Fund – an idea she first proposed in her State of the Union speech last year. It is not yet clear how many billions would go into new funds.
Such talks could be sensitive for Member States. Whilst some southern states have asked for more EU funds for investment, the Netherlands and Germany have been reluctant to discuss further investments. The Commission is set to discuss the plans with Member States next week.
Officials on both sides of the Atlantic are in discussions, although chairperson of the EU's trade committee, Bernd Lange, has stated that he doesn't expect a negotiated solution as only minor changes can be agreed during talks.