Suggested use of tax credits comes after pressure to respond to Biden’s $369bn green subsidy scheme in US
The EU is scaling up its green subsidy race with the US through plans to ease state aid rules on tax credits for renewable energy projects.
European policymakers have been facing pressure to respond to US president Joe Biden’s $369bn (£298bn) Inflation Reduction Act, which aims to support renewables investment in everything from wind turbines to electric vehicles.
The European Commission wants to ease state aid rules to allow investment into production facilities in green industries, according to draft plans.
EU member nations are divided over whether to put in place the new rules and how long for, according to the Financial Times, which originally reported the plans. The draft proposals reportedly recommend that some of an €800bn (£705bn) Covid-19 recovery fund could be diverted towards tax credits.
“The provisions on tax benefits would enable member states to align their national fiscal incentives on a common scheme, and thereby offer greater transparency and predictability to businesses across the EU,” the draft said.
Europe’s energy system has been under extreme scrutiny since Russia invaded Ukraine and Moscow’s subsequent halting of gas supplies into Europe.
Brussels plans to set new targets for green industrial capacity and streamline the approval process for renewables projects. It intends to expedite the level at which deals are scrutinized by the commission under state aid rules.
Biden’s new rules, put in place last autumn, have revived the renewables market in the US, resulting in a wave of new projects. The president hailed the legislation as “the biggest step forward on climate ever” on passing the bill last year.
It has been determined that the legislation could cut US emissions by roughly 40% by 2030, compared with 2005 levels, bringing Biden near the goal of reducing US emissions in half by the end of the decade.
Companies, politicians, and investors have called for the UK and Europe to follow suit, with Jozef Síkela, the Czech minister of industry and trade, likening the US programme to “doping in sport”.
In Britain, ministers have been accused of hindering renewables investment by extending a windfall tax on North Sea gas and oil companies to electricity generators, including solar and wind projects on older contracts.
Buy Crypto NowChris Hewett, the chief executive of the industry body Solar Energy UK, has blamed the government for providing more generous tax terms to gas and oil projects and “tilting the playing field against renewables”.
In the meantime, the shadow climate change secretary, Ed Miliband has said a Labour government would make an “anti-Opec” alliance of nations dedicated to renewables, to bring down energy prices and encourage clean technology.
On Monday, the oil and gas firm BP said global carbon emissions were expected to drop quicker than it had previously predicted as a result of Russia’s invasion of Ukraine and Biden’s efforts to support green investment.
