EU must support clean tech to compete with U.S. -Commission head

KIRUNA, Sweden, Jan 13 (Reuters) - The European Union needs financing tools to help its clean tech compete against U.S. rivals that are set to benefit from government support under the U.S. Inflation Reduction Act (IRA), the head of the European Commission said on Friday.

Ursula von der Leyen stopped short of calling for new joint EU debt issuance at a news conference in the northern Swedish town of Kiruna, noting that 37% of the EU's existing 800 billion euro recovery fund was earmarked for climate change-related investment.

European countries broadly welcome Washington's commitment to the green transition, but fear the IRA will unfairly disadvantage their companies because many of the subsidies only go to products, such as electric cars, that are built in North America.

The Commission is planning to loosen state aid rules, but some EU countries can spend more than others. Von der Leyen said the bloc needed "credible and ambitious" financing tools to preserve the single market.

"Such funding should be available in the short term and in the mid-term to allow for an adequate European answer," she said.

She said the Commission was working on an assessment of what the EU clean tech sector needed to compete with U.S. rivals.

"It is for us very important to be fast... because the investment decisions are being taken now," she said.

"We want to keep the industry here and we want to support the industry here because we need it for the green transition and we need it for our prosperity," von der Leyen said.

France, Italy and others have called for new joint EU borrowing to deal with the economic fallout of the Ukraine war and the energy price crisis, but Germany, the Netherlands and Scandinavian countries prefer other solutions.

German Chancellor Olaf Scholz has pointed out that much of the EU's jointly borrowed recovery fund has not yet been spent and some 200 billion euros not even claimed. He said this money should be spent before considering any new joint borrowing.

Yet Scholz's own Social Democrats published a paper on Thursday saying that new EU joint borrowing should be "constructively examined".

Reporting by Jan Strupczewski, writing by Bart Meijer, Editing by Philip Blenkinsop

Our Standards: The Thomson Reuters Trust Principles.