The European Union is trying to speed up the development of clean energy technologies by offering tax credits and domestic subsidies to companies—a move designed in part to keep pace with US President Joe Biden’s landmark green package.
According to Bloomberg News, a draft of the European Commission’s Green Deal Industrial Plan, the executive body will propose a program that would make it possible for EU countries to avoid strategic dependencies on key clean technologies—such as solar energy and batteries—by diversifying suppliers and developing local production.
The initiative, which is still subject to change before its adoption on Wednesday, would ease state-aid rules in order to compete with the U.S. Inflation Reduction Act and other new spending measures that include roughly $500 billion in tax breaks over a decade.
Some member states have expressed concerns that the EU plan could unfairly benefit wealthier countries that have more fiscal capacity. Margrethe Vestager, the EU’s competition chief has warned that too much government support for large corporations could disadvantage small and poorer countries. The European Union’s largest economies—Germany and France—have been the biggest beneficiaries of a change in existing rules that will help firms grapple with high energy costs.
“We need to be cautious in relaxing state-aid rules,” Italian Prime Minister Giorgia Meloni told reporters in Rome on Monday. “We should help companies but we can’t risk weakening the single market — we should guarantee a level playing field.”
EU leaders will discuss the commission proposal next month, and a plan for a sovereignty fund—to finance innovative sectors first proposed last September —is due to come by summer as part of their review of the EU’s long-term budget.
The EU has urged the US to tweak its law to give European companies more flexibility in benefiting from credits being offered; however, officials have grown skeptical that Washington will make meaningful changes and are now mapping out ways of protecting their own industry.