EU seeks to change state aid regulations

The European Union is ramping up its push for renewable energy by considering new measures that would loosen state aid regulations on tax credits for green energy projects.

The European Commission is reportedly drafting proposals that would simplify the approval process for renewables projects, set new targets for green industrial capacity, and allow for the redirecting of some funds from the COVID-19 recovery package towards tax credits. The new rules are being considered as a response to US President Joe Biden’s $369bn Inflation Reduction Act, which has revitalized the US renewables market.

The draft proposals aim to align national fiscal incentives across the EU and provide greater transparency and predictability to businesses. However, member states are divided over the introduction of the new rules, and for how long they should apply. The energy system in Europe has come under increased scrutiny after the recent invasion of Ukraine by Russia and the subsequent disruption of gas supplies to Europe.

Critics of the UK government’s energy policy have accused ministers of discouraging renewables investment through a windfall tax on North Sea oil and gas firms that also extends to electricity generators, including wind and solar projects on older contracts. In contrast, the shadow climate change secretary Ed Miliband has proposed an alliance of countries committed to renewables to bring down energy prices and promote clean technology.

BP, the oil and gas company, has predicted that global carbon emissions are expected to fall faster than expected due to the conflict in Ukraine and Biden’s push for green investment. Companies, investors, and politicians are calling for Europe and the UK to follow suit and adopt similar measures to support renewables.