EU scales up green subsidies: How you can benefit from new support for clean investments
Global | Publication | April 2023
Extended access to funding for net-zero industry
Resources to achieve the objectives of the European Green Deal can come from a combination of EU Member States, the EU itself and private investment.
Funding from the Member States must adhere to the EU State aid rules, and be notified to and approved by the EC before the funding is granted. The State aid General Block Exemption Regulation (GBER) exempts Member States from this notification obligation, if all the GBER criteria are fulfilled.
State aid is, in principle, incompatible with the internal market, but where the relevant requirements are met, certain categories of aid must or may be allowed as compatible. The EC adopted the State aid Temporary Crisis Framework (Framework) in March 2022 to specify the criteria for the assessment of compatibility with the internal market of State aid measures that Member States may take to remedy the direct and indirect economic effects following the aggression against Ukraine by Russia, including the counter measures taken, for example by Russia. In contrast to the GBER, aid granted under this Framework must be notified to the EC, but the EC ensures swift assessment and approval, assuming that all conditions are met.
- Carbon capture and storage;
- Zero-emission vehicles;
- Energy performant buildings; and
- Recharging and refuelling infrastructure
They revised GBER also:
- Increases and streamlines the possibilities for aid in the area of environmental protection and energy.
- Facilitates the implementation of certain projects involving beneficiaries in several Member States.
- Extends the possibilities for training and reskilling across sectors by exempting from notification training aid below €3 million.
This revised GBER applies until the end of 2026.
b. Temporary Crisis and Transition Framework
Under the Net Zero Plan, the EC will increase EU funding by redirecting financial resources already available under the REPowerEU, the InvestEU Programme for private investments and the Innovation Fund:
- An additional €25.4bn will be added to the existing €225bn of unused loans available under REPowerEU. The newly published Guidance on Recovery and Resilience Plans encourages Member States to create one-stop-shops for approvals, tax breaks and workforce reskilling. A large part of the additional support will come from the Recovery and Resilience Facility (RRF) initially established to address the effects of COVID-19. On 4 April 2023, the EC published updated State aid guidance templates that aim to support Member States in designing measures to implement the REPowerEU plan.
- The InvestEU Fund provides a budget guarantee for public and private investments in sustainable infrastructure and R&D. €11.37bn in funds is still available for 2024 – 2027, but the EC is assessing how to increase this amount. Measures by Member States matching funding through the InvestEU Fund will benefit from a simplification of the rules in the GBER.
- The Innovation Fund subsidises cleantech through competitive bidding procedures. In autumn 2023, the EC will launch a competitive procedure to boost production of renewable hydrogen. Terms and conditions will be announced in June 2023 and the indicative budget will be €800m.
EU regulatory initiatives
In her initial presentation of the Net Zero Plan, EC President Ursula von der Leyen acknowledged the need to increase the EU's manufacturing capacity for net-zero technologies and products. To this end, the proposal for the NZIA, which follows the model of the EU Chips Act (see our briefing here), and the CRMA, aims to create a predictable and simplified regulatory environment.
The proposed NZIA supports the manufacturing of products that are key to meeting climate neutrality goals, including batteries, turbines, heat pumps, solar, electrolysers, biogas, grid technologies, and carbon capture. Following a significant debate regarding the inclusion of nuclear energy projects, a compromise was reached, including small modular nuclear reactors and nuclear plants producing limited waste in the NZIA (but not as “strategic projects”). Investors in the aforementioned strategic areas will benefit from a shortening and simplification of administrative procedures and the introduction of a “one-stop-shop” single point of contact. Strategic projects, selected by Member States with the EC’s participation, including cross-border initiatives, are encouraged with a view to reaching new industrial benchmarks by 2030, including a target that 40% of all clean technology required to meet the REPowerEU and Green Deal objectives will be manufactured in the EU.
The proposed NZIA has the following pillars:
- Accelerating CO2 capture, targeting annual 50Mt injection capacity in strategic CO2 storage sites in the EU by 2030, with proportional contributions from oil and gas producers.
- Facilitating access to markets by requiring public authorities to consider sustainability and resilience criteria for net-zero technologies in public procurement procedures and auctions.
- Enhancing skills, including setting up Net-Zero Industry Academies, with the support and oversight by the Net-Zero Europe Platform, to coordinate action and exchange information. This platform will also enable Member States and the EC to identify financial needs, bottlenecks, and best practices, and provide advice on securing funding.
The CRMA aims to ensure security of supply of raw materials required for the EU net-zero technologies. The EC had included adoption of this legislation in its Work Programme 2023 and has regularly updated its the list of critical raw materials (available here) that it considers are most important economically and have a high supply risk. The proposed CRMA (COM(2023)160) codifies this list and a new list of strategic raw materials used in strategic sectors such as renewable energy, digital, space and defence technologies. The EC will review and, if necessary, update both lists at least every four years. The CRMA will provide a regulatory framework to support the development of EU capacity and the sustainability and circularity of the critical raw material supply chains in the EU. The accompanying Communication (COM(2023)165) proposes measures to diversify supply chains through new international mutually supportive partnerships.
The CRMA has the following key pillars:
- Defining priorities and objectives, including benchmarks for capacity in the strategic raw material supply chain and diversifying extraction, processing and recycling.
- Strengthening capacity, e.g. a new framework to select and implement Strategic Projects that can benefit from streamlined permitting, enabling access to finance, and developing exploration programmes in Europe.
- Improving EU preparedness and mitigating supply risks, including monitoring of supply chains, information exchange and coordination on strategic raw materials' stocks among Member States.
- Setting up a “European Critical Raw Materials Board”, composed of Member States and the EC, to advise and coordinate on implementation and discuss strategic partnerships with third countries.
- Protecting the environment by improving circularity and sustainability of critical raw materials, including measures to improve collection and recycling of critical raw material-rich waste.
- Diversifying imports of critical raw materials by strengthening global engagement with reliable partners, including partnerships with emerging markets and developing economies.
The EU’s goal is to be able to extract 10%, process 40% and recycle 15% of its annual consumption of strategic raw materials by 2030. In addition, not more than 65% of annual consumption of each strategic raw material at any stage of processing should be from a single third country by 2030.
In relation to finance, the Communication acknowledges that private investment may need to be supplemented by State aid, noting that the revised State aid rules give Member States more flexibility to grant aid, including for the production and recycling of critical raw materials related to key net-zero technologies.
Notably, the EC proposes as well to set up and supervise a joint purchasing system for strategic raw materials subject to it being compatible with EU public procurement and competition rules.
Trade and resilient supply chains
As part of its effort to secure supply of critical raw materials, the EU will intensify efforts to conclude free trade agreements with Australia, Chile, India, Indonesia, Mexico and New Zealand. It has already established Strategic Partnerships with Canada under the EU–Canada Comprehensive Economic and Trade Agreement (CETA) and Ukraine in 2021 and with Kazakhstan and Namibia in 2022.
It is also negotiating with the US administration over possible changes to the IRA. In October 2022, the US-EU Task Force on the IRA was launched to support these negotiations. As regards export credits, the OECD countries agreed on March 31, 2023, to support an EU initiative to modernise the system and expand the scope for eligible green or climate-friendly projects.
Finally, the EC has reiterated its willingness to use the EU Foreign Subsidies Regulation (FSR) (see our briefing here), the EU FDI screening procedure and other instruments to counter unfair competition. The EC will deploy the International Procurement Instrument (IPI) for the first time in 2023 to promote reciprocity for access to public procurement markets. This will enable the EC to tackle market protection in third country public procurement.
Stakeholders can provide feedback on the NZIA and CRMA proposals until 31 May 2023. The legislation could be finalised before the European Parliament elections in 2024. At the European Council meeting on 23 March 2023, the EC’s plan to propose a European sovereignty fund before summer 2023 was noted.
Women at sea: What you don’t see
Nina Varumo is a freelance portrait and documentary photographer based in Stockholm. A recent project of hers Kvinnor till sjöss (‘Women at sea’) is on ongoing photo series highlighting the working life of female seafarers in order to change the stereotypical image of what and who is a seafarer.