A ‘Common’ Interest? Explaining Variation in EU Member States’ State Aid for Important Projects of Common European Interest

The European Union’s (EU) industrial policy turn has sparked exciting scholarly and policy debates. Current literature has convincingly explained the origins of this paradigmatic shift. However, our knowledge is more limited on how the EU and its member states implement this new industrial policy, and what explains these outcomes. Meanwhile, policymakers and scholars frequently warn that pursuing green industrial strategies through national state aid may lead to intra-European subsidy wars, fragmenting the bloc’s internal market. Indeed, existing research has revealed significant differences in national subsidies provided under recent state aid schemes. We contribute to both debates by mapping and explaining variation in EU countries’ state aid for Important Projects of Common European Interest (IPCEIs). Often considered the “poster child” of EU industrial policy, IPCEIs facilitate the development of breakthrough technologies in sectors critical to the green and digital twin transitions, such as microelectronics, batteries, hydrogen fuels and cloud computing. After mapping member states’ state aid for each IPCEI project, the question “Under which conditions do EU member states provide significant state aid for IPCEIs?” is answered in two steps. We first develop a framework consisting of political, (geo)economic, administrative and ideological conditions derived from literature on state aid and geoeconomics. In this framework, we put forward four hypotheses to explain variation in IPCEI state aid across member states. First, a strong presence of businesses in the IPCEI sector leads to IPCEI state aid. After all, EU countries aim to strengthen the competitiveness of domestic manufacturers as this creates more jobs, pleasing voters. Second, undiversified supply in the IPCEI sector also leads to IPCEI state aid, because member states try to remedy security of supply issues by strengthening domestic manufacturing. Third, significant state aid in previous years leads to IPCEI state aid. Since preparing an IPCEI state aid request entails a significant administrative burden, countries without previous state aid experience lack the administrative capacities needed to compile an IPCEI dossier. Fourth, having a left-leaning government leads to IPCEI state aid, due to the governing parties’ Keynesian preferences for government intervention. In a second step, using fuzzy-set qualitative comparative analysis, this framework is applied to explain the variation in the amount of state aid (or lack thereof) provided by the 27 EU member states in the first 8 IPCEIs, resulting in 216 cases. The outcome of interest (IPCEI state aid provided) is operationalized as a member state’s “participation depth ratio” (Lopes-Valença, 2024), controlling its share of state aid in an IPCEI for its share in EU GDP. Data on the amounts of permitted state aid per member state is detailed in the European Commission’s IPCEI decision letters. The explanatory conditions will be operationalized quantitatively, using data from existing databases, such as Eurostat, WITS, EUSA and ParlGov. In sum, we map EU member states’ state aid for each IPCEI project and explain under which conditions these subsidies are provided. We therefore shed light on the politics of industrial policy subsidies, and contribute to the literature on the EU’s diverging implementation of industrial policy.