European Commission struggles to push through STEP challenge to US IRA funding – update
The European Commission is in key talks with the European Council about its response to the US Inflation Reduction Act.
The Strategic Technologies for Europe Platform (STEP) was proposed last year as the European reply to the IRA to boost investments in critical technologies in Europe such as battery production and critical materials. It is adding token amounts to existing programmes and steering those funds – Horizon Europe, Innovation Fund, InvestEU, EU4 Health and the European Defence Fund – towards more cleantech objectives.
This allows the EU to claim STEP provides up to €160bn of spending, although there is only an additional €500m for Horizon Europe and €3bn for the InvestEU and €1.5bn for the defence fund.
However, because the STEP proposal also covers the Recovery and Resilience Facility, and cohesion policy funds that would invest in projects such as battery gigafactories and plants for materials to boost a sovereign supply chain, there is a lot of political pushback on top of the trade tensions caused by the passing of the IAR bill last year.
As a result this has been one of the top four topics in negotiation at the highest level between the Commission and the European parliament this week.
“The fourth topic is competitiveness. Here, it is important to be very vigilant that we keep the clean-tech industry in Europe,” said Ursula von der Leyen, president of the commission after the first day of talks with president of the European Council, Charles Michel.
“You know the pressures that are on the clean-tech industry and the effects of the Inflation Reduction Act. The Inflation Reduction Act is relatively fast and predictable because it is about tax breaks,” she said.
“We have therefore two elements that we can use on the European level – without having taxes on the European level. One is state aid. And the other one is our proposal of STEP, a fund that needs an initial funding to be then leveraged and that gives then access to different European funds for companies that need an answer or an alternative to the Inflation Reduction Act.”
STEP also introduces the Sovereignty seal – an EU quality label for sovereignty projects.
In its talks, the European Council underlined the need to accelerate work on developing the EU’s competitive edge in digital and clean technologies, including by focusing on innovation, research, education and skills and securing a sufficient supply of clean and affordable energy to reduce key critical dependencies and diversifying supply chains through strategic partnerships. It also wants to foster the transition towards a more circular economy and reduce the regulatory burden.
It is calling on the legislators in the European Parliament to reach a prompt agreement on the Critical Raw Materials Act, the Net-Zero Industry Act and the reform of the electricity market design but does not mention STEP.
Instead, it invites the Commission to continue work on addressing distortive effects of tariffs and subsidies by global actors to ensure a global level playing field, referring to the IRA bill. It also invites the Commission to work intensively on mitigating the problematic and discriminatory elements of the IRA), including by ensuring that the European Union is granted the equivalent status of an FTA partner under the provisions of the IRA.
Update
“We had a very dense discussion this morning with a multitude of subjects, so I will choose a few and report on those. Indeed, we started the day with a very good discussion about Europe’s economic competitiveness,” said von der Leyen.
“The reform of the electricity market is important to drive the production of renewables up, and thus the energy prices down. And I very much welcome the agreement that we have found this week in Council, so now we can proceed with that reform. And there is the platform, that we called STEP, for strategic investments – part of our proposed revised EU budget. STEP is the fund that we want to create to step up investments in emerging and strategic technologies. And I hope that all these proposals will be adopted soon so that we can kind of start our economic future right now,” she said.
consilium.europa.eu; ec.europa.eu
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