The head of the European Commission stressed the need to counter America’s new “green subsidies”.

Ursula von der Leyen has called for financing tools to help EU clean tech companies compete against their US competitors, who are benefitting from government support under the US Inflation Reduction Act, Reuters reports.

The European Commission President pointed out that 37 percent of the EU’s existing €800 billion recovery fund was earmarked for “climate change-related investment”.

Threat to international competition

The Inflation Reduction Act (IRA), which passed last year, includes a $369 billion subsidy package that purports to encourage climate-friendly investment.

European countries fear the IRA will unfairly disadvantage their companies because many of the subsidies exclusively go to products that are only built in the USA and Canada, such as electric cars and their battery systems.

The threat from the US legislation is part of a dual blow to European business, following massive spikes in energy costs due to the sanctions imposed on Russian gas. These sanctions have forced European energy providers to switch to buying liquid natural gas (LNG) shipped to Europe by the US — often at five times the price of its Russian counterpart.

Keeping businesses from leaving

Von der Leyen said the union needed “credible and ambitious” financing tools to preserve the single market. That is because while the Commission is planning to loosen state aid rules, POLITICO says that some EU countries can spend more than others.

“We want to keep the industry here and we want to support the industry here because we need it for the green transition and we need it for our prosperity”, von der Leyen said.

Von der Leyen’s remarks come on the heels of an urgent call from EC Competition Chief Margarethe Vestager to establish a new state aid framework to counter “urgent” challenges posed by the United States. In a letter sent to EU finance ministers last week, Vestager said that she envisaged “dedicated provisions to support new investments in production facilities, including tax breaks”.

Von der Leyen also recognized the need for speed. “It is for us very important to be fast… because the investment decisions are being taken now”, she said.