EU leaders have agreed to allow temporary and proportionate support to ensure Europe's future as a manufacturing base for green tech products in the face of US and Chinese competition.
Plans by the European Commission to loosen rules on state aid for investments in renewable energy, decarbonising industry, hydrogen, or zero-emission vehicles have been partly driven by the US Inflation Reduction Act, which includes local content requirements.
The EU is concerned that such requirements could encourage companies to abandon Europe for the United States.
Germany's Chancellor has expressed confidence that talks between transatlantic partners can limit discrimination against European-based companies.
In a bid to counter US and Chinese competition, European Union (EU) leaders have agreed to offer 'targeted, temporary and proportionate support' to ensure Europe's future as a manufacturing base for green tech products.
One of the proposals involves the loosening of rules on state aid for investments in renewable energy, decarbonising industry, hydrogen, or zero-emission vehicles.
This move has been partly driven by the US Inflation Reduction Act, which includes local content requirements.
Germany's Chancellor, Olaf Scholz, has expressed concern that these requirements could incentivize companies to abandon Europe for the United States.
After the EU leaders' summit in Brussels, Chancellor Scholz stated: "When we are looking at our competitiveness, we need to do our own homework and do everything to ensure that we do not have an international subsidy race.
" As a result, leaders agreed to offer temporary state aid to promote manufacturing of green tech products in an attempt to counter both US and Chinese competition.
The EU hopes that this move will encourage companies to stay in Europe, thus maintaining its competitiveness in this industry sector.
However, while the EU is offering assistance to green initiatives, countries such as China and the US continue to pour billions of dollars into them, dwarfing the EU's efforts.
It remains clear, as Scholz suggested, that Europe needs to address its slipping competitiveness on two fronts: investment and subsidies from elsewhere and Eurocentric bureaucracy.
The EU's decision comes amid concerns that local content requirements from US subsidies will give a further "advantage" to companies in America that abandon Europe.
Despite optimism for talks between the transatlantic partners, the EU has expressed consideration of the possibility of 'targeted, temporary and proportionate' support, should transatlantic talks result in a lack of progress.