Von der Leyen announces ‘Inflation Reduction Act’ plan for Europe


From pv magazine Germany

With the Inflation Reduction Act (IRA), the US government has thrown politics and business in the European Union into turmoil. A total of €340 billion ($369 billion) is available in the United States to support renewables, hydrogen, and other clean-tech industries. Those wishing to benefit from the subsidies and tax credits must either produce in the United States or use products that are manufactured there. This raises the concern that European companies might relocate some of their production operations to the other side of the Atlantic.

At the World Economic Forum in Davos this week, EU Commission President Ursula von der Leyen announced that she will counter the IRA with a similar EU industrial plan. Specifically, Europe will relax rules for national funding and make aid more accessible. In addition, targeted subsidies will be used to set up production facilities for renewable technologies in strategic value chains, in order to counteract the risk of relocation through third-country subsidies – for example, to the United States.

However, some member states lack the financial resources to participate in the new plan, so additional EU funds will also be made available. Over the medium term, there should be a “European Sovereignty Fund” for such cases. Policymakers are currently analyzing how much money the EU is providing here. A first draft will likely be available by the end of the month.

“We only have a small window to invest in clean technology and innovation and to become leaders before the fossil fuel economy is over,” said von der Leyen.

In addition, the German politician also announced the removal of bureaucratic hurdles for photovoltaics and wind energy, heat pumps, energy storage, and electrolyzers.

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“In particular, we will examine how the approval of new sites for clean technologies can be simplified and accelerated,” von der Leyen said. In addition, the EU Commission wants to present a “net-zero industry law” that sets clear targets for clean technologies in Europe by 2030.

“The International Energy Agency estimates that the market for mass-produced clean energy technologies will be worth around $650 billion per year in 2030 – more than three times what it is today,” explains von der Leyen. “To get ahead, we need to keep investing, strengthening our industrial base and making Europe more investment and innovation friendly.”

Dries Acke, policy director for SolarPower Europe, said that “the Green Deal Industrial Plan is a significant moment for European solar manufacturers. The EU is seriously acting on the concerns of the European solar sector over the last months and years.”

The association said it believes the plan will give European manufacturers the tools to become more competitive.

“President von der Leyen’s promise to temporarily simplify EU state aid rules, using straightforward tax-breaks, is critical. Solar manufacturers are facing energy prices two or three times higher than China and the US, and they are seeking relief quickly,” said Acke.

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