The EU is extending state support guidelines amid the disaster to forestall inexperienced tech corporations from leaving

The EU Commission is expanding relaxation of state aid rules to prevent green-tech companies from migrating abroad and to allow the bloc’s transition to a net-zero economy.

Rules on national subsidies were changed back in 2022 in response to Russia’s war on Ukraine, to allow member states to more easily finance struggling companies and energy production in Europe.

Now, growing concerns about an escalating global subsidy race have prompted the EU to further extend this temporary crisis framework – and even broaden its scope to include support for domestic clean-tech companies battling climate change.

The move appears to have been heavily influenced by the US Inflation Reduction Act (IRA), which provides $369 billion in subsidies for green tech made in America. This has sparked fears that EU companies may be tempted to relocate to the US.

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To avoid a potentially catastrophic blow to the bloc’s long-term competitiveness in the green-tech sector, the Commission has adjusted state aid rules to streamline approval of subsidies for companies involved in renewable energy adoption, energy storage and… decarbonization accelerate industrial production processes.

The EU has targeted six main sectors: batteries, solar panels, wind turbines, heat pumps, electrolysers, and use and storage of carbon capture. This also includes the production of key components as well as the manufacture and recycling of associated critical raw materials.

“The framework gives Member States the ability to offer assistance in a timely, clear and predictable manner.

The amended rules will give Member States more flexibility in injecting public funds by allowing for higher aid ceilings and simplified aid calculations.

SMEs and businesses in disadvantaged regions are entitled to more support, while EU countries can also access greater resources if help is provided through tax breaks, loans or guarantees.

To prevent cases where there is a high risk of resettlement, countries will have a ‘matching aid’ option. That is, to offset subsidies offered by a non-EU government and to keep the company within the borders of the Union. Alternatively, Member States can close the company’s expected funding gap.

“Our rules protect a level playing field in the internal market.

To ensure that these options do not provoke unfair competition in the bloc, the Commission has put in place three safeguards:

1. Aid can be granted to companies in less developed areas or projects in at least three Member States.
2. Eligible companies must use state-of-the-art production technology from the perspective of environmental emissions.
3. The aid must not trigger a shift of investments between Member States.

EU countries can apply the new rules until December 31, 2025, but payouts could continue after that.

“The framework we adopted today gives member states the ability to grant state aid in a timely, clear and predictable manner,” Margrethe Vestager, executive vice president in charge of competition policy, said in a statement.

“Our rules allow Member States to accelerate net-zero investment at this critical moment while preserving a level playing field in the internal market and cohesion objectives. The new rules are proportionate, targeted and temporary.”