For example, under the Inflation Reduction Act, Americans will receive a subsidy of up to $7,500 starting January 1, 2023 when they buy a US-made electric car equipped with a locally made battery. According to FD, Joe Biden is therefore ‘selling’ a climate law to the IRA, while the European Commission notes above all protectionism.
The law also gives American companies millions in tax credits if they invest in sustainable jet fuel, wind farms, hydrogen, battery manufacturing, solar energy and other forms of sustainability. In total, Biden is allocating $369 billion for the bill.
European fear
The European Commission is mainly concerned that the IRA is encouraging companies to move production from the EU to the US, says Cats. According to Cats, European firms are already in dire straits from the energy crisis and the war in Ukraine, and prices in the US are significantly lower than here. According to the European Union, the IRA violates the rules of international trade.
European officials say they are concerned about “the way in which the financial incentives provided for by the law are designed”. The IRA is a major concern for Europe, which labels the measures as discriminatory, Cats says.
A task force has been feuding over the issue between the US and Europe for some time, but “it’s not going well at all,” says Cats. A sort of summit will be held on 5 December in which Europe wants to assert its position vis-à-vis the Americans, but it is not certain that this will offer comfort. Earlier, Americans said that Europe should also increase its subsidies to the business community. An added problem is that the law passed despite fierce Republican opposition, so Biden has little leeway to change the law.
The law will take effect on January 1, so Europe has six weeks to formulate a response. Brussels is now aiming for the same privileged position as Canada and Mexico, but behind the scenes Brussels is already threatening to hike import tariffs on American products.
Read the full article by Ria Cats in FD here