The Government will be able to match the US like for like on green subsidies if it wants to, under a temporary relaxation of the EU’s state aid rules.
he move, a rejoinder to US President Joe Biden’s €350bn inflation reduction act, will allow EU countries to grant companies bumper aid, guarantees or tax breaks if the investment risks being “diverted” outside the bloc due to more generous measures elsewhere.
News of the relaxation came just hours ahead of European Commission president Ursula von der Leyen’s meeting with Mr Biden in Washington.
Ireland, along with several northern and eastern EU countries, has warned the EU against engaging in a subsidy race with the US. Ireland has traditionally opposed any EU move that could be viewed as protectionist.
Brussels is trying to speed up the transition to a net-zero economy and prevent the US from luring investors away from Europe, a fear that is strongest in countries such as France and Germany.
The relaxed state aid rules apply to subsidies for renewable and clean technologies including batteries, solar panels, wind turbines, green hydrogen, heat pumps and carbon capture projects.
Aid can be granted to individual firms “up to the amount of subsidy which the beneficiary could demonstrably receive for an equivalent investment in a third country jurisdiction” the European Commission said.
It won’t apply to firms in difficulty.
Companies that receive aid must commit to staying in the area for at least five years after the new plant, equipment or project is complete.
The aid is limited to low-income regions or cross-border projects and it should not lead to subsidy shopping or a diversion of investment around the bloc, the European Commission said.
The relaxed rules apply until the end of 2025.
Commission vice-president and competition chief Margrethe Vestager said the new rules give governments “the option to give state aid in a fast, clear and predictable way”.
"Our rules enable member states to accelerate net-zero investments at this critical moment, while protecting the level playing field in the single market and cohesion objectives. The new rules are proportionate, targeted and temporary.”
Lower amounts of aid are possible if governments can’t prove that the project risks being diverted outside the bloc.
Subsidies of up to €150m (or €200m for poorer regions) per firm will apply for clean tech including batteries, solar panels, wind turbines, heat pumps and other technologies that help in the race to net zero emissions.
The EU is also raising the threshold for notifying green subsidies, meaning smaller projects can get off the ground more quickly, without prior approval from the Commission.
“The new set of rules facilitate the design and implementation of measures that promote innovation, competitiveness and sustainability,” Ms Vestager said.
