Greening ICT: What Can the EU Do?

Government subsidies for companies in the EU are designed to stimulate investment in sustainable practices and technologies, particularly in sectors that contribute to energy efficiency and carbon reduction (European Policy Centre, 2022). These subsidies can take various forms, including direct financial support, tax reliefs, and grants tailored to encourage businesses to adopt greener practices. According to the European Commission, these financial incentives encourage investments in renewable energy sources, energy-efficient technologies, and sustainable practices across various sectors, including Information and Communication Technology (ICT). The EU has implemented several key subsidy programs: 

1. EU Emissions Trading System (ETS): As detailed above, the EU Emissions Trading System (ETS) is a cornerstone of the EU’s climate policy, aiming to reduce greenhouse gas (GHG) emissions cost-effectively. As a cap-and-trade system, it sets an upper limit (or cap) on emissions for companies and sectors covered under the system. These companies are allocated emission allowances, which represent the right to emit a certain amount of CO₂. If companies emit less than their allocated allowances, they can sell the surplus credits, creating an incentive to reduce emissions further. Conversely, those exceeding their allowance must purchase additional credits from others who have surplus, driving investments in emission-reducing technologies. For the ICT sector, the EU ETS has driven companies to invest in low-carbon technologies as part of their strategy to meet emissions caps. By using surplus credits or investing in energy-efficient technologies, ICT firms are able to generate financial returns through the sale of excess credits or avoid the costs associated with purchasing additional allowances. In particular, businesses such as data centers have adopted energy-efficient server infrastructure and renewable energy solutions, reducing their carbon footprint while improving overall energy efficiency. 
2. National Recovery and Resilience Plans (NRRPs): The National Recovery and Resilience Plans (NRRPs) were developed as part of the EU’s response to the COVID-19 pandemic, with a strong emphasis on fostering green recovery and sustainability. Each EU member state is responsible for preparing and implementing its own NRRP, which must include investments in green technologies and climate adaptation measures. The European Commission monitors the progress of these plans, with a focus on energy efficiency, renewable energy, and digital transformation. The NRRPs allocate substantial funding to clean energy technologies and digitalisation, which benefits ICT companies looking to adopt green solutions. For instance, Germany’s NRRP includes €9 billion for the development of green hydrogen, indirectly benefiting the ICT sector by encouraging the creation of digital tools to monitor and optimise energy use. Likewise, these funds support the adoption of smart technologies, cloud computing infrastructure, and digital solutions that improve energy efficiency. As noted in a European Commission report, “NRRPs facilitate the transition to a low-carbon, more energy-efficient economy by aligning investment in green technologies with digital transformation” (European Commission, 2024). This synergy between sustainability and digitalisation creates a fertile environment for ICT innovation focused on reducing energy consumption and carbon emissions. 
3. Regional Development Funds: The European Regional Development Fund (ERDF) aims to reduce regional disparities in the EU by funding projects that improve economic development, employment, and social inclusion, with a particular focus on energy efficiency and climate action. ERDF funds are targeted at regions that are lagging in terms of infrastructure, technology, and sustainability practices. ERDF funding has supported numerous projects where ICT companies are implementing smart technologies to reduce energy use. For example, in Poland, a manufacturing firm received ERDF funding to upgrade its operations with energy-efficient equipment, including cloud-based solutions for energy management and data analytics, reducing energy consumption by 30%. These funds not only support the technological upgrades but also promote the diffusion of energy-efficient solutions within ICT, particularly in manufacturing and logistics sectors. 
4. Tax Incentives: Many EU countries provide tax reductions or credits for businesses investing in renewable energy technologies or energy-efficient equipment. In France, businesses can benefit from a tax credit for investments in energy-saving equipment, leading many companies to upgrade their facilities. For example, a French tech company utilised this tax incentive to install energy-efficient servers, resulting in significant cost savings on energy bills and reduced greenhouse gas emissions. 
5. State Aid Schemes: The European Commission permits member states to provide state aid under certain conditions for research and development projects aimed at improving energy efficiency or reducing carbon emissions. Italy’s “Industria 4.0” initiative is a prime example of this approach, providing substantial financial support for companies investing in advanced manufacturing technologies that enhance energy efficiency. One Italian tech firm received state aid to implement automation solutions that improved production efficiency while reducing energy consumption by 20%. 

According to the European Commission, these subsidies are crucial for supporting the EU’s transition to a low-carbon economy by enabling businesses to invest in sustainable technologies and practices without bearing the full financial burden.