Europe moves from anger to acceptance of US climate law

The visit is a marked change in tone from previous engagements. French President Emmanuel Macron accused the United States of “hurting” his country when Congress passed his landmark Inflation Reduction Act.

European officials initially pushed President Joe Biden and senior US lawmakers to make the law more inclusive of European businesses. The law provides $369 billion in grants and tax credits aimed at encouraging the purchase of electric vehicles and establishing green infrastructure. One of the most contested provisions, a $7,500 tax credit for electric vehicles, is limited to cars built in North America and containing battery-critical minerals sourced in the country or from a partner. a free trade agreement, which the EU is not.

Habeck and Le Maire say they have not given up on this campaign. But amid uncertainty about how far the Biden administration will go to address their concerns, officials said the European Union, one of the United States’ most important trading partners, deserved at least a transparent account of how the US government will use the law to channel money to industry.

“We agreed on the need for full transparency on the level of subsidies and tax credits,” Le Maire told reporters after the meetings, as well as on “the need to ensure communication constantly at ministerial level, in particular on the strategy on tax credits”.

“You can’t have fair competition if there isn’t full transparency on the level of public subsidies and public tax credits that are given to private companies,” he added.

But aside from promises of transparency and cooperation, meetings with US officials do not appear to have resulted in any concrete agreement to alleviate the EU’s main concern with the IRA – the North American demand for the assembly of subsidized electric vehicles.

The Mayor said the parties agreed in principle that “the implementation of the IRA should include as many European components as possible”. But he declined to elaborate on whether that meant the United States had budged on the terms of the electric vehicle tax credit, or whether it would seek to maximize EU shares within existing parameters.

The economic dust has shown just how complex and potentially divisive the race to a clean energy future will be. Even as they pursue their own interests, economies like the US and EU have at least one common goal beyond slowing climate change: to ensure that China does not dominate supply chains for the battery production and renewable energies.

For their part, European nations are already developing their own subsidy program to prevent a feared migration of manufacturing from the EU to the United States, where energy costs are lower and states are waiting with sweeteners to distribute. After meeting with US officials, ministers said the need for Europe to respond with its own subsidy program is clearer than ever.

“One conclusion we need to draw from the meetings,” Le Maire said, is that “we see the absolute need for Europe to arrive at the definition and implementation of a European green technology plan.”

US officials have encouraged the EU to boost its own industries, often noting that there is ample room in the market for widespread government support for clean energy.

A Treasury Department reading of the meeting said Yellen emphasized the need for innovation and technology development “on both sides of the Atlantic to accelerate the transition to green energy and meet our collective climate goals.”

The Treasury Department provided preliminary guidance in late December on how it will implement key features of electric vehicle tax credits and promised full details in March. In a victory for the EU, he hinted at adopting a broad definition of countries considered partners in the US free trade agreement. He also said imported electric vehicles would be eligible for a separate credit for clean commercial vehicles. However, many legal experts said it was unlikely the administration could still circumvent the law.

German and French officials highlighted a promise to cooperate on creating a common market for components that go into many clean energy products, with Habeck welcoming the creation of a “critical minerals club” between trading partners. France and Germany had already agreed last year to join a “mineral security partnership” to strengthen supply chains of critical minerals.

“The idea is that we will find concrete steps … on how we achieve more diversity in the supply chain,” Habeck said. “If that is achieved, then we could have the steps for new agreements, for further alignment for goods that are produced from critical minerals.”

Habeck and Le Maire also met with the senator on Tuesday. Joe Manchin (DW.V.), who played a key role in shaping the final details of the IRA, in particular the consumption tax credit for electric vehicles.

Speaking at an online event hosted by media outlet Semafor ahead of the meeting, Manchin defended the IRA bill as an important step toward U.S. energy security and said his or Congress’ intent had never been. been to harm Europe.

“We can get them to participate essentially [in the IRA provisions]”, Manchin said. “But every country is doing what it can to stimulate its market, to keep its people working, to have a strong economy. They can’t stop us from doing the same.

Manchin also encouraged European officials to offer incentives to increase investment in clean energy and climate change technologies. He expressed concern that the EU wants to ‘keep beating the crap out of people by charging carbon taxes, carbon levies and all [else they’re] do, rather than giving them incentives, basically, to mature these industries faster.