By Philip Blenkinsop
BRUSSELS (Reuters) – The European Union’s spending watchdog on Wednesday criticised the European Commission for not fully assessing the need for public subsidies to support the green transition or determining whether they would distort the EU’s single market.
The European Court of Auditors (ECA) issued four main recommendations in an embarrassing rebuke for the Commission, including strengthening oversight, collecting more sectoral data and ensuring aid is conditional on sound analysis. The recommendations are not binding but are typically followed.
The ECA’s report into looser state aid rules during the COVID-19 pandemic, after Russia’s invasion of Ukraine, and for the European Green Deal said the EU executive acted swiftly to allow EU countries to grant unprecedented subsidies.
But it concluded Brussels did not always sufficiently monitor the impact on competition of aid that nearly tripled from pre-pandemic levels to over 320 billion euros ($346 billion) in both 2020 and 2021 and almost 230 billion euros in 2022.
From 2023, EU members have had greater scope to support renewable energy deployment, decarbonisation of industry and manufacturing of clean tech products, such as wind turbines or heat pumps. Some measures last until the end of 2025.
The ECA said the Commission did not do an economic assessment on the need for this state aid and had not yet looked into its impact.
The EU executive pressed for rapid action in response to the $369 billion of green subsidies in the U.S. Inflation Reduction Act (IRA), although a report in October 2023 about IRA’s impact on the EU economy was inconclusive.
“Recent studies have indicated that the IRA’s impact might be more limited than initially thought. This also then raises a question related to the appropriate level of additional public support for the EU economy,” the ECA said.
In some cases, aid can be granted without having to compare this with no-aid scenarios and there is no clawback mechanism to ensure aid is limited to a minimum.
The Commission, said the ECA, argued that the impact of EU countries outspending each other and distorting competition was limited mainly because the state aid regimes are temporary.
“However, there is a risk that even temporary exemptions have a longer-term impact,” its report said.
($1 = 0.9239 euros)
(Reporting by Philip Blenkinsop; Editing by Mark Potter)
