EU Grapples with How to Support Industries as Energy Prices Soar

By Staff, Agencies

European Union leaders will argue on Thursday over how to prop up their countries' industries, which have been whacked by soaring energy prices since the outbreak of war in Ukraine and now face the threat of subsidy-fueled US competition.

Poorer EU countries want a coordinated response to the US Inflation Reduction Act [IRA] - $430 billion worth of tax breaks for green energy - because they lack the deep pockets of richer member states like Germany to underpin their industries.

The tug-of-war among 27 leaders in Brussels will be inconclusive, diplomats said.

Still, it will mean that the EU ends 2022 struggling to stay united after a year of closing ranks to support Ukraine after the beginning of Russia’s military operation in February and pressuring Moscow with far-reaching and unprecedented economic sanctions.

EU Commission President Ursula von der Leyen proposed ahead of the summit to loosen state aid rules in renewable energy and clean-tech to shield European industry.

"There is a risk that the Inflation Reduction Act can lead to unfair competition," she said in a speech. "We need to give our answer, our European IRA."

However, the EU is split between traditionally "dirigiste" countries that want to see the creation of a joint "sovereignty fund" to ensure a level playing field across the bloc and wealthier states that line up behind free market principles.

"Some governments have deep pockets and extensive possibilities to support their industry through national schemes, others have not," said one senior EU diplomat. "We don't want a national subsidy race among member states ... but there have to be carefully drafted limits."

While this dilemma is likely to be parked for another summit in February or March, the leaders may agree on Thursday on a ninth package of EU sanctions against Moscow.