Is the EU flouting the rules to benefit some countries and not others?

Dennis Harding

24th August 2009

A report in the Observer stated that Regional development authorities (RDAs) believe their counterparts in Europe are flouting EU state aid rules to attract low-carbon manufacturers to set up factories. The authorities fear that as a result the UK is lagging behind in its efforts to establish a "green" manufacturing base.

In Germany, for example, manufacturers are frequently offered "soft loans" via state-owned banks to help them set up operations, a form of indirect subsidy. State-owned utilities often provide new factories with free connections to the grid, which is not possible in the UK since all utilities have been privatised.

In Spain, wind-farm developers have to source some of their turbines from local manufacturers to win planning permission.
An industry source said: "Regional development authorities in the UK complain that their hands are tied. There are some exemptions to state aid rules on environmental grounds, although whether what is going on is legal or not is hard to say. For the UK to do the same would go against the industrial policy of the last 20 years."

Development authorities try to attract local investment by providing small grants to businesses and helping them find sites and get planning permission. In the UK they do not give preferential treatment to low-carbon manufacturers, such as the makers of wind turbines or solar panels, for example.

But does this raise a deeper question as to how established are these new technologies and are we in danger of complaining after we have missed the opportunity to develop green tech at an earlier stage?

Ongoing research by Prognos AG and Delta Economics across the whole of the EU notes that the EUREKA programmes which develop research and collaboration in new areas of technology and help to develop markets and manufacturing capability are rarely engaged in by those from the UK. Those EU countries who do participate at an early stage are often those who are then in a position to benefit from years of establishing a “green” manufacturing base, for example. ‘We know the rules and we know how to play them”, quoted one EUREKA cluster manager. EUREKA programmes are open to all EU countries, and help set up and develop clusters of technology.

See: http://www.guardian.co.uk/business/2009/aug/23/eco-business-suffers-eu; http://www.eureka.be/thematic/aboutStrategicInitiatives.do; info@deltaeconomics.com