Brussels approves German aid to prevent an electric battery factory from going to the United States

The European Commission this Monday gave its approval to German state aid of 902 million euros for the Swedish company Northvolt to install a battery production plant for electric vehicles in the German city of Heide that, otherwise, would be would have moved to the United States. It is the first time that the aid compensation mechanism provided for in the Temporary Crisis and Transition Framework that the Community Executive approved in March of last year has been used individually to counteract the injection of subsidies for green projects that the Reduction law represented. Inflation Prevention (IRA) in North America and thus avoid losing the race in the green transition.

“This paves the way for greater European production of batteries,” highlighted the vice president of the Commission responsible for the Digital Era and Commissioner for Competition, Margrethe Vestager, who has recently rejoined the Brussels dynamic after her failed attempt against Nadia Calviño to take over. with the presidency of the European Investment Bank (EIB).

The mechanism used is known as matching aid: the possibility, for “exceptional cases”, that an EU Member State can offer a compensatory sum – although, as Vestager has stressed, not necessarily equally high, but “enough so that the investment stays in Europe” — to the company that receives offers of subsidies in “other jurisdictions”, especially the United States, after the approval of the IRA. The US package, valued at $369 billion, provides subsidies to the industry to boost the long-awaited green investment.

Specifically, the German aid approved by Brussels consists of a direct subsidy of 700 million euros and a guarantee of another 202 million for Norvholt to build a production plant for advanced and high-efficiency batteries in the city of Heide (Schleswig-Holstein). for electric vehicles.

Thus, Vestager said at a press conference together with the German Vice Chancellor and Minister of Climate Action and Economy, Robert Habeck, “we make sure that if a Member State wants, it can offset the aid so that the investment is made in Europe, so that “The technology is developed in Europe and jobs are created in Europe.”

The plant will have an annual capacity of 60 gigawatt hours (GWh), which translates into the capacity to produce between 800,000 and one million electric vehicles per year, depending on the size of the battery. The plans foresee that the plant will begin operating in 2026 and reach its full production capacity three years later, says the Commission, which insists that this aid “has an incentive effect, since without it, the plant would have been established outside the European Economic Area.

Among the conditions to allow this type of aid is that it does not cause the “relocation of investments between Member States”, an issue that worried countries like Portugal. The aid offered by Germany, which must be disbursed by December 31, 2025 at the latest, is, adds the Commission, “proportionate and limited to the minimum necessary to activate investment in Europe”, but without making investment in Germany “more beneficial”. than in the United States, another of the conditions provided for in the specifications for this type of extraordinary subsidies.

“These types of actions show that action to combat climate change and industrial production combine very well,” Habeck highlighted. “We see that the European emissions reduction strategy can also be the main driver of new investments,” he added.

Responding to a question about whether this type of aid, which a country with sufficient fiscal space like Germany can afford but not other European Member States, can endanger the internal market, Vestager assured that the Commission has carefully examined whether this aid “affected to equality of conditions.” For his part, Habeck has called not to miss the mark when analyzing who the competition is. “It is not between Germany and Italy or between Denmark and the Netherlands, it is between Europe and China and the United States,” she recalled. All countries deserve opportunities, she acknowledged, “but European solidarity also means that those who can invest, who can be part of a new economic force, are not viewed with suspicion,” she added.

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