The head of the EU Commission wants to find a compromise with the USA in the subsidy dispute.
(Photo: Reuters)
Washington US President Joe Biden and EU Commission President Ursula von der Leyen are seeking dialogue in the dispute over US subsidies for green technologies. “I think it’s great that there is now such massive investment in clean technology,” von der Leyen said at a meeting with Biden at the White House on Friday. That is why, like the USA, they also want to focus on a green industrial program in Europe – and at the same time talk to Washington about the US law, which has caused great concern in Germany and the EU about competitive disadvantages. It provides for billions in investments in climate protection and subsidies for US industry. One wants to create a clean industry and new jobs with the law, said Biden.
Specifically, it is about the so-called Inflation Reduction Act (IRA) of the USA. The problem from a German and European perspective: Many subsidies and tax credits are linked to the fact that profiting companies use US products or produce them themselves in the USA.
The Europeans have accused the US of protectionism because of the law. Chancellor Olaf Scholz said in January that he welcomed the fact that the US wanted to invest billions in energy and climate protection. However, requirements for certain products should not lead to discrimination against European companies.
>> Also interesting: Response to IRA: Von der Leyen wants to channel state money into wind, solar and nuclear
EU and US representatives have been working in the background for months to defuse the conflict. At its core, the IRA pursues a set of goals that the US shares with the European Union, a senior White House official said ahead of the meeting. There is agreement that “historic investments” are necessary to achieve the climate goals.
They want to invest in the expansion of clean energy and related jobs and ensure stable supply chains. Appropriate measures are taken “alongside allies and partners”. The aim is for both sides to communicate their approaches to the other and not get into a competition.
Biden does not want to untie the package again
In the case of Biden, that recently sounded less forgiving. He had repeatedly made it clear that he wanted to focus more on preferential treatment for domestic industry. The IRA is a major domestic political success for the US President. Even if not all of the 80-year-old’s climate projects made it into the package, the law is a milestone in US climate policy. Biden therefore does not want to untie the package again. This means that the talks between the US and the EU are now mainly about room for interpretation and questions of application. Nothing will change in the basic direction of the law.
A stumbling block for Europeans is now tax breaks for buyers of electric vehicles. These tax benefits are subject to certain requirements. These include requiring a certain percentage of car battery parts – and increasing in the coming years – to come from the United States or a country with which the United States has a free trade agreement.
>> Read also: EU warns of factory closures over IRA
EU manufacturers of electric cars fear major disadvantages in the US market. Because the United States has various free trade agreements – for example with Canada or Mexico. However, there is no such agreement with the European Union. A solution may now be emerging in this area. There is a mini free trade agreement in the area of critical minerals with Brussels. Because the term free trade agreement is not defined in the US climate law. Then electric cars from Europe could also be eligible for the tax advantages.
A real trade war is not in the interest of either Brussels or Washington. This is especially true at a time when the West wants to stand together in the face of Russia’s war of aggression in Ukraine. Nevertheless, Germany, France and other EU states have repeatedly made it clear that there must be a European answer to the US law.
Finally, EU Commission President von der Leyen presented a new green industrial program that is intended as a reaction to the US and Chinese subsidy policy. For example, Brussels wants to expand access to subsidies and will give the EU states more freedom for their own subsidies in the future.
More: Europe counters the subsidy policies of China and the USA