EU´s response to the USA´s IRA: a Green Deal Industrial Plan for the Net-Zero Age

On 1st February, the European Commission has released a communication on a Green Deal Industrial Plan (GDIP) for the Net-Zero Age. It outlines the steps the Commission wants to take to stimulate the investment in the EU´s “net-zero industry”. This communication comes as a reaction to the highly debated United States´ Inflation Reduction Act (IRA), providing tax incentives to boost clean energy, leading to a competitive disadvantage for European companies. In this light, the Commission will propose several regulatory changes to the current legal framework. 

Företagarna views the Commission’s proposed move to link the temporary state aid crisis framework with the ‘Green Deal Industrial Plan’ as highly problematic. Indeed, the policy frameworks of the Green Deal Industrial Plan and the temporary state aid framework in reaction to the energy supply/price crisis, have different motives and different functions. Therefore, we believe these should not be taken out of their context.

Necessary and proportional?

Företagarna views that the proposed amendments to section 2.5, in the absence of an impact assessment, it is difficult to judge whether the proposed measures are necessary and proportional. Our general view is that the state aid rules have benefited the internal market and kept members states from engaging in destructive subsidy races. The state aid rules should thus not be subject to hastily implemented radical changes.

Concerning which types of energy sources that can come into question for state aid under the proposed rules, Företagarna believes that to meet the proposed aims of the GDIP, all fossil-free energy sources need to be included, which means nuclear power as well. 

To meet the goals of an increased supply of energy, not only funding is needed; permit and building processes need to be shortened, not hampered by burdensome excess scrutiny. The EC has in this area the possibility to check whether member states impose too much red tape/regulation.

Enhanced subsidy race

As to the proposed amendments to section 2.8, they are seemingly proposed as to mirror similar proposals in the United States’ Inflation Reduction Act. Företagarna does not view an intensified state subsidy competition between the US and the EU favorably. It will not engender productivity and innovation in Europe, competitiveness will be hurt in the long run, and the risk of local corruption will increase with the deployment of large funding programs of this sort. 

Especially worrying is the proposal to grant extra large amounts of state aid to cover discrepancies when compared to funding /aid schemes in third countries. This risks enhancing the ‘subsidy race’ internationally as well as distorting competition further in the single market (even more escalated by the provisions granting possibilities for extra state aid in member states with certain assisted areas). The proposals regarding section 2.8 should thus not be implemented.

Företagarna insists on the EU and its members states to focus more on reforms and measures to increase productivity, innovation capacity, job creation in the private sector, the functioning of the internal market and free trade, and less on governmental subsidies, tariffs, special interest-driven regulation, and increased taxation.