Brussels reacts to reinforce its strategic autonomy

Published
04/07/2023 04:45

Updated
04/07/2023 04:50

The IRA Act (Inflation Reduction Act), approved by the Administration Biden a few months ago with 370,000 million dollars directed to manufacturing and support to the industry for investments in advanced energy projects, it has unleashed a race between the main world powers to reinforce their strategic autonomy. Thus, the European Commission has reacted by implementing a series of unprecedented measures to counteract its possible effects.

Modification and expansion of the Temporary Crisis and Transition Framework adopted on March 23, 2022, which allowed member states to take measures to support the economy in the context of Russian aggression against Ukraine. The objective is to support key sectors for the transition towards an economy with zero net emissions, in line with the Green Pact Industrial Plan.

Among the measures to be incorporated, the following stand out:

• Extension until December 31, 2025the possibility for Member States to continue supporting the measures necessary for the transition towards a net zero emission industry, in particular, to systems designed to accelerate the deployment of renewable energy and energy storage, as well as the decarbonisation of industrial production processes.

• Modifies the scope of these measures so that support systems for renewable energy, energy storage and decarbonisation of industrial production processes are easier to design thanks to:
• The simplification of the conditions for the granting of aid to small projects and less mature technologies, such as renewable hydrogen,
• The expansion of the possibilities of supporting the deployment of all types of renewable energy sources,
• Greater possibilities to support the decarbonisation of industrial processes and the transition towards fuels derived from hydrogen,
• Forecast of higher aid ceilings and simplified calculations.

• Introduces new measures, applicable until December 31, 2025, to continue accelerating investments in key sectors for the transition towards an economy with zero net emissions, which allow providing financial assistance for the manufacture of strategic equipment; batteries, solar panels, wind turbines, heat pumps, electrolysers, and carbon capture and storage, as well as for the production of key components and for the production and recycling of related critical raw materials.

Together with the adoption of the new framework and in line with its objectives, the Commission modified the General Regulation of Exemption by Categories (RGEC) to further facilitate, simplify and accelerate support for the EU’s green and digital transitions, in line with the Green Pact Industrial Plan.

Inform after the fact

The RGEC declares specific categories of state aid compatible with the Treaty on the Functioning of the European Union, provided that certain conditions are met. It exempts these categories from the requirement of prior notification and approval by the Commission, allowing Member States to grant aid directly and inform the Commission only ex post.

Among the modifications highlight:

• Aid increases in the field of environmental protection and energy: implementation of renewable energies, decarbonisation, ecological mobility and biodiversity, investments in renewable hydrogen and increased energy efficiency.
• They facilitate the implementation of projects involving several Member States, such as Major Projects of Common European Interest (PIICE), in the field of R&D, by increasing aid intensities and notification thresholds.
• Support measures exempted by categories established by Member States to regulate the prices of energy, such as electricity, gas and heat produced from natural gas or electricity.
• Very significant increase in the notification thresholds for aid for environmental protection and R+D+i.
• They clarify and simplify funding support options companies, SMEs and emerging companies.
• The RGEC is extended until the end of 2026.
• It aligns the GBER provisions with the new Regional Aid Guidelines, the Climate, Energy and Environmental State Aid Guidelines, the Risk Financing Guidelines, the Research, Development and Innovation Framework and the Broadband Guidelines.

These modifications to the regulation will be formally adopted in the coming weeks after the translation of the text into all the official languages ​​of the EU, entering into force the day after its publication in the Official Journal of the European Union.

Both legal regimes are significantly more beneficial than the pre-authorized schemes within the framework of the PERTEs (Strategic Projects for Economic Recovery and Transformation), by the Commission, which is why they will largely define some of the next calls for aid in the context of these; as is the case of the new call for PERTE VEC, the one addressed to “capital goods for renewable energies” of the Circular Economy PERTE, as well as aid within the framework of the Decarbonization PERTE.