EU companies can get as much in EU aid as US subsidies under looser rules

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium
European Union flags flutter outside the EU Commission headquarters, in Brussels, Belgium, February 1, 2023 REUTERS/Yves Herman

BRUSSELS, March 9 (Reuters) - EU businesses can get as much government funding as from a U.S. green energy subsidy package, under looser European Commission rules announced on Thursday aimed at keeping them in Europe.

The rules target investments in renewable energy, decarbonising industry, hydrogen or zero-emission vehicles in a bid to counter the lure of the U.S. Inflation Reduction Act (IRA), a $369 billion programme of green subsidies including tax credits.

The rules mark the EU's latest effort to reduce its dependence on U.S. and Chinese products and technologies. Its proposed Net-Zero Industry Act would speed up permits for green projects, and a Critical Raw Materials Act due to be publicly released on March 14 would boost recycling and diversify sourcing.

The Commission said matching aid from governments can kick in when there is a real risk of investments being diverted away from Europe.

"Member states may provide either the amount of support the beneficiary could receive for an equivalent investment in that alternative location (the so-called ‘matching aid')," the EU executive said in a statement.

States can also provide funding needed to motivate a company to locate the investment in Europe.

To ensure that the aid will actually encourage a company to remain in Europe, cross-border investments must involve projects in at least three EU countries. The companies must also use state-of-the-art production technology to reduce environmental emissions.

The Commission said EU countries have until the end of 2025 to set up renewable energy and energy storage schemes and decarbonisation projects to qualify under the easier funding rules.

Reporting by Foo Yun Chee; Editing by Richard Chang

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