The EU is stepping up its green subsidy race with the US with plans to loosen state aid rules on tax breaks for renewable energy projects.
European politicians have been forced to respond to US President Joe Biden’s $369bn (£298bn) inflation cut bill that aims to encourage renewable energy investment in everything from electric cars to wind turbines.
The European Commission plans to loosen state aid rules to allow investment in production capacity in green industries, according to draft plans.
EU member states are divided on whether to implement the new rules and for how long, according to the Financial Times, which first revealed the plans.
The draft proposals reportedly suggest that some of the €800bn (£705bn) Covid-19 recovery fund could be redirected towards tax credits.
“The provisions on tax incentives will allow member states to align their national fiscal incentives with the overall scheme and thus provide greater transparency and predictability for businesses in the EU,” the draft says.
Europe’s energy system has come under intense scrutiny since Russia’s invasion of Ukraine and Moscow’s subsequent strangulation of gas supplies to Europe.
Brussels intends to set new targets for “green” industrial capacity and simplify the approval process for renewable energy projects. He plans to increase the level of verification of transactions by the commission in accordance with the rules of state aid.
Biden’s new rules, introduced last fall, have revitalized the U.S. renewable energy market, leading to a wave of new projects. The president hailed the law as “the biggest step forward on climate change” since the bill was signed last year.
It has been estimated that the legislation could cut U.S. emissions by about 40% by 2030 from 2005 levels, bringing Biden closer to the goal of cutting U.S. emissions by half by the end of the decade.
Companies, investors and politicians have urged Europe and the UK to follow suit, and Josef Sikela, the Czech Minister of Industry and Trade, has equated the US program with “doping in sport”.
In the UK, ministers have been accused of discouraging investment in renewable energy by spreading a North Sea oil and gas windfall tax on power generators, including wind and solar projects under old contracts.
Chris Hewitt, chief executive of industry organization Solar Energy UK, accused the government of offering more generous tax terms for oil and gas projects and “tilting the playing field against renewables.”
Meanwhile, Climate Change Shadow Secretary Ed Miliband said the Labor government would form an “anti-OPEC” alliance of renewable energy nations to lower energy prices and promote clean technologies.
Oil and gas company BP said on Monday that global carbon emissions are expected to fall faster than it previously expected as a result of the war in Ukraine and Biden’s efforts to encourage green investment.
