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Draft EU: The response to the US green investment program


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The European Commission will further relax rules to support investment in new production units in green sectors

The EU goes on the counterattack. planning to allow a looser framework for state aid, including the use of tax breaks, for businesses investing in renewable energy and green technologies, according to a draft obtained by the FT.

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The European Commission will further relax rules to support investment in new production units in green sectors, while some of the 800 billion euros from the Recovery Fund could also be redirected to tax credits, according to the draft. The proposed measures are part of a comprehensive plan by Brussels to respond to the US law, which has prompted a flood of warnings that many companies will leave the EU and relocate to the US to take advantage of the subsidies. The proposal will be published on Wednesday after an internal committee debate and could change.

Further relaxing restrictions on tax credits, the Commission it tries to emulate one of the most basic advantages of the US green technology support program, which is the simplification for businesses of the framework of access to federal tax credits. However, the move is expected to spark sharp disagreements within the EU because it will be easier for countries with greater fiscal leeway, such as Germany, to provide fiscal incentives for the green transition compared to more fiscally strapped countries. of the European South. The end date of the relaxation has not yet been agreed.

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However, a representative of the Commission stated that the European Commission does not comment on documents that have been leaked to the press. Member states are divided over whether and for how long to allow the rules to be relaxed. Some countries in the South warn that the framework under consideration risks upending the level playing field by disproportionately helping rich countries funnel money into their companies.

The new rules will allow more aid for renewable energy technologies and sources beyond what is already set out under current EU laws. for renewable energy sources, including green hydrogen and biofuels. “Provisions for tax benefits will enable member countries to align their national fiscal incentives in a common plan offering greater transparency and predictability to businesses across the EU,” the document states. The Brussels they also intend to simplify and speed up approval procedures for programs of common European interest and set targets for green industrial capacity by 2030.

It is also expected to raise the threshold above which the Commission examines deals under its state aid regime. This will make it easier for governments to subsidize hydrogen, carbon sequestration, zero emission vehicles and energy efficiency measures. Brussels estimates that the industry needs to invest €170 billion by 2030 in solar, wind, battery, heat pump and green hydrogen production plants.

Cleantech industries have criticized the EU’s funding regime as too complicated to access the funding needed for their businesses, saying US tax credits are a simpler and more attractive system.

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