G20 summit in Bali
European Commission President Ursula von der Leyen arrives for the G20 leaders' summit in Nusa Dua, Bali, Indonesia, November 15, 2022. Reuters

European Commission President Ursula von der Leyen proposed to EU leaders on Wednesday a loosening of state aid rules in renewable energy and clean-tech as a response to high energy prices and a U.S. subsidy law that threaten European industry.

In a letter to European Union leaders meeting in Brussels for a summit on Thursday, von der Leyen said the bloc should look into temporarily simplifying state aid rules for renewable energy, decarbonising industrial processes and clean-tech.

"These changes could be implemented at the beginning of 2023," she said.

The Commission is consulting with EU members on this.

EU competition chief Margrethe Vestager warned the European Parliament on Wednesday that public support could not "do it all".

"State aid can be a short term solution to the current challenges but to be competitive on the world stage, we must make further efforts to remove single markets barriers, barriers that unfortunately still exist," she said.

Von der Leyen said there were clear risks of the U.S. Inflation Reduction Act (IRA) "un-levelling" the playing field.

The IRA gives tax credits to consumers buying electric vehicles and other green products as long as they are made or processed in the United States or in countries with which it has free trade agreements. This could include the mineral content of batteries.

The EU executive chief said Brussels was seeking a solution in talks with Washington, saying one option could be to create a raw materials 'club' to overcome China's monopoly in this area.

Von der Leyen said Europe needed more public investment to accelerate the green transition, with complementary EU financing required, given not every EU member has budgetary space for large increases in state aid.

She said she would present concrete proposals in the summer on the idea of creating a European Sovereignty Fund to help Europe become a world leader in clean-tech.

Finally, von der Leyen said the EU had to step up its deployment of renewable energy, including by speeding up the process of issuing permits.