Democrats’ Climate Bill Sparks Potential Green Trade War With Europe

By John Hugh DeMastri

Leaders in the European Union are intensifying efforts to compete with the U.S. on green energy, after the Biden administration’s signature climate bill was perceived as siphoning manufacturing from Europe, The Associated Press reported Monday.

Ahead of a special economic summit from Feb. 9 – 10, E.U. politicians and diplomats have discussed developing massive subsidies to compete with the $369 billion of subsidies in the U.S. Inflation Reduction Act (IRA), such as electric vehicle tax credits, designed to promote domestic green energy and manufacturing, the AP reported. European and Asian allies, particularly in the automotive industry, have been vocal in their opposition to the law, which they believe unfairly promotes U.S. companies at the expense of foreign firms. (RELATED: Solar Company Joins Multibillion Green Investment Spree In Republican States)

“We need to send a strong message that we will act to safeguard our industrial base. It is crucial that the EU remains an attractive place to invest, innovate and produce,” said E.U. Council President Charles Michel in Stockholm, Monday, the AP reported. French Finance Minister Bruno Le Maire similarly said that the trading bloc needed to “shock” the system and simplify subsidies to give companies easier access to investments.

“We want state aid that can be much more massive for certain sectors that we clearly identify — hydrogen, electric batteries, solar panels, semiconductors,” Le Maire said, according to the AP. “There is not a moment to lose.”

France and Germany, the two largest economies in the E.U., are leading the charge in calling for subsidies large enough to compete with the IRA and promote green manufacturing in Europe, according to the AP. The E.U. loosened subsidy regulations in 2020 to compensate for the impact of the Russian invasion of Ukraine, with more than 75% of the €672 billion (roughly $725 billion) going to France and Germany.

Diplomats from the two E.U. economic titans are scheduled to visit D.C. in February to lobby for exemptions allowing E.U. companies to qualify for the IRA.

The U.S. Treasury Department released several documents detailing proposed guidelines for the implementation of the IRA on December 29, significantly relaxing the eligibility requirements for foreign manufacturers to receive a $7,500 consumer tax credit for electric vehicles. Prior to these guidelines being published, several foreign automakers spent billions investing in factories for electric vehicles and batteries in the U.S., amid a worldwide surge in demand for electric vehicles.

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