In a letter dated 13 January, 2023, the Executive Vice President of the European Commission, Margrethe Vestager, wrote to EU member states regarding revisions to state aid regulations.
Government Offices of Sweden, Ministry of Climate and Enterprise
Swedish Enterprise continues to believe that the Commission’s proposals, which are a response to the Inflation Reduction Act (IRA), are premature. It is imperative to analyse more carefully how the IRA will affect European businesses. This includes waiting for the guidelines that are expected to be published in March 2023.
Another factor that points to the validity of waiting is that there is still no analysis of how the combined climate policies of the EU and the US distort competition.
The proposals to further ease state aid rules are inappropriate. They risk increasing the already tangible distortions of competition that exist, where a small number of countries favour their businesses to a far greater extent than others. The proposals also risk increasing the complexity of the regulatory framework, administrative burdens, and in the long term, undermining Europe’s competitiveness, dynamism and productivity.
Proposed changes to the Temporary Crisis Framework (TCF)are inappropriate, as the Framework is temporary and unsuitable for forward-looking investment. The proposals risk overlapping with existing regulations and have an unclear legal basis in the Treaty on the Functioning of the EU(TFEU).
Sensible proposals to make the regulatory framework simpler and processes faster are welcome if they do not in themselves result in a more watered-down regulatory framework and increased amount of state aid. However, reviews of state aid notifications based on the TCF is already relatively fast. Swedish Enterprise is happy to take part in upcoming proposals on this point. Broadening state aid rules to cover all types of fossil-free energy seems reasonable in principle.
The introduction of new support for green investment in strategic sectors where there is a risk of investment being taken out of the EU due to subsidies given in third countries is discouraged. There is a very real risk that this would lead to a state aid race with the outside world. If such aid is introduced, it is vital that it is limited to investment aid, time limited, and that principles of proportionality, appropriateness and necessity are applied.
IPCEI regulations should continue to be a limited complement to other state aid regulations. The regulation and effects of projects need to be evaluated to assess how regulations and processes can be improved.
Pending more knowledge, the Commission should develop guidance/best practice based on its existing experience on how beneficiaries, authorities and member states should work with the IPCEI. Lengthy application processes are largely due to the fact that parties are unfamiliar with processes, that applications are substandard, and that other parts of the state aid rules would be more appropriate to use.
It may also be worth considering the division of large integrated projects into smaller integrated sub-projects to a greater extent to reduce the need for co-ordination and administration.