THE European Commission proposed a plan on Wednesday (Feb 1) to try to ensure Europe can compete with the United States as a manufacturing hub for electric vehicles and other green products and reduce its dependence on China.

Commission President Ursula von der Leyen announced a loosening of European Union (EU) state aid rules, a repurposing of existing EU funds, faster approval of green projects and drives to boost skills and to seal trade agreements to secure supplies of critical raw materials.

The plan is partly a response to multi-billion-US dollar support programmes of China and the United States, including the latter’s Inflation Reduction Act.

“We are competititive ... what we are looking at is that we have a global playing field,” von der Leyen told a news conference.

Many EU leaders are concerned that the local content requirements of its US$369 billion of green subsidies will encourage companies to relocate, making the United States a leader in green tech at Europe’s expense.

The International Energy Agency estimates the global market for mass-produced clean energy will triple to around US$650 billion a year by 2030, with related manufacturing jobs more than doubling. The EU wants a part of the action.

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The Commission proposed loosening state aid rules for investments in renewable energy or decarbonising industry, on a temporary basis, until end 2025, while recognising that not all EU countries will be able to offer subsidies to the same extent as France or Germany.

In the short term, EU members could, for example, use some 225 billion euros (S$321.7 billion) of loans remaining from the 800 billion euro post-Covid Recovery Fund.

The European Commission is hoping member states will back its plan at a Feb 9-10 summit but huge chunks are likely to be hotly debated among member states.

Some EU members have already voiced resistance to parts of the plan, notably the loosening of state aid rules and the prospect that bigger countries such as France and Germany would be able to outspend others.

There is also clear opposition from some EU members to previous suggestions that the plan could entail further joint borrowing.

Longer term, the Commission will propose creating a European Sovereignty Fund to invest in emerging technologies.

In the coming months, the Commission will propose a Net-Zero Industry Act that could streamline permitting processes and harmonise standards and a Critical Raw Materials Act to promote local extracting, processing and recycling.

The bloc is heavily reliant on China for rare Earths and lithium, which are vital materials for the green transition.

The EU executive also wants to seal more free trade agreements and partnerships to make supply chains more resilient and to open markets for green goods.

Meanwhile, German chip supplier ZF Friedrichshafen and US chipmaker Wolfspeed will announce plans on Wednesday to build an electric vehicle chip plant in the Saarland region, according to three sources close to the matter.

“Amid the concerns that the US wants to divert investments from Europe with its Inflation Reduction Act, we’re showing that a US firm wants to invest in Germany,” a German government source said. REUTERS