Fierce race on green technology

European Commission (EC) President Ursula von der Leyen, declared her determination to find a countermeasure for the challenges posed by the subsidy strategy for green technology from the US. The declaration reflected the efforts of the European Union (EU) to protect the interests and goals related to clean energy and avoid a "subsidy race" with the US in this area.
Electric cars at a Tesla's factory in Grünheide, Berlin, Germany. (Photo: AFP/VNA)
Electric cars at a Tesla's factory in Grünheide, Berlin, Germany. (Photo: AFP/VNA)

The US Inflation Reduction Act (IRA) is a large-scale climate plan consisting of 370 billion USD in spending, to reduce greenhouse gas emissions. The IRA offers tax breaks for companies with investments in clean energy, providing subsidies for electric vehicles, batteries and renewable energy projects conducted in the US. The EU is concerned that the law could affect jobs in Europe, particularly in the energy and car manufacturing sectors.

However, the above plan also allows some exceptions for countries that have signed Free Trade Agreements (FTAs) with the US. Meanwhile, the EU and the US do not, so the bloc is looking to strike a trade deal with the US, so that the EU can access the benefits from US President Joe Biden's ambitious climate plan.

The leader of the EU said that the IRA of the US has brought big cuts to clean technology produced in this North American country, but could hurt Europe's economies, on the interpretation of the above law, while increasing investment in clean technology by the EU itself.

US President Joe Biden is scheduled to meet EC President Ursula von der Leyen in Washington on March 10. According to the White House statement, during the meeting, President Joe Biden and the EC President will discuss the coordination of the US and the EU, to respond to the climate crisis by investing in clean technology based on guaranteed supply chains.

The EC has proposed to increase the levels of state subsidies for businesses in the EU so that they can compete fairly with the US in the race to become a hub for the production of electric vehicles and other green products, as well as efforts to reduce the impact of the IRA on European industry. According to Leyen, EU electric carmakers, which already have access to US tax cuts, need to ensure that the EU's battery and battery component manufacturers, also benefit from the IRA.

However, EU members have yet to agree on how to approach this issue. Meanwhile, the US expressed its aspiration to cooperate with the EU, to avoid the two allies "stepping on each other" in the green technology race. US Treasury Secretary Janet Yellen has supported the EU's idea of green subsidies, to offset the damage the bloc fears, due to the effects of the IRA. According to Janet Yellen, if Europe acts to offer subsidies similar to the US policy, this is a good climate policy.

According to the US official, the US side will cooperate with the EU because the two sides share many similar goals and both want to ensure an adequate supply of all products that are important to clean energy, such as batteries, solar panels and wind turbines, to jointly benefit from the clean energy transition.

A green subsidy race will cost both sides equally, so the EU and the US want to avoid this. To compete fairly, however, the EU has been showing its determination not to be "out of breath" in the race with the world's No.1 power, in the field of green technology.