The Biden administration is trying to ease European concerns about America’s new climate and tax law, which some allies see as a protectionist industrial policy that puts their economies at risk.
More than a year after the Inflation Reduction Act was passed, European officials are still frustrated by the legislation, which includes more than $300 billion in spending and tax credits aimed at boosting America’s clean energy industry. US allies have complained that the law puts them at a disadvantage by making their economies less attractive places to invest given the scale of US incentives.
As wars escalate in Ukraine and the Middle East, the Biden administration wants to address those concerns and send a clear message to its closest allies that the US is not trying to start a subsidy war.
“A misrepresentation I often hear is that the IRA signals a move toward American protectionism or the beginning of a race to the bottom of subsidies,” Deputy Treasury Secretary Wally Adeyemo plans to say in a speech in Germany on Tuesday. Is made. For a copy of his prepared remarks. “I want to be clear: There is no such thing.”
Mr. Adeyemo said the United States continues to look for ways to improve coordination with Europe on climate and energy security initiatives and made the case that the Biden administration wants countries like Germany to maintain a strong industrial base. The United States is pursuing a policy of so-called friendshoring, which involves strengthening supply chains with allies while diversifying away from China.
“Even as we promote American production, we recognize the need to build a resilient supply chain that includes our partners,” says Mr Adeyemo, speaking at the Industry 2023 conference in Berlin.
Europe has been under economic pressure in the past year as it moved away from buying Russian energy and spent heavily to support Ukraine. European officials are particularly concerned that new US incentives for the auto industry will drive investment away from their economies. President Biden’s new legislation includes more than $50 billion in tax credits aimed at enticing Americans to buy electric vehicles assembled in North America.
In recent months, the Biden administration has been negotiating agreements with Western allies that would allow the critical mineral they produce to count toward U.S. tax credits for electric vehicles. Mr. Adeyemo suggested that over time, the agreements would help both the United States and Europe increase production of clean energy.
“Through such agreements and partnerships, we will help ensure that both the United States and Europe have access to the critical raw materials needed to produce electric vehicle batteries and power the renewable energy economy,” He will say.
The EU is attempting its own clean energy subsidies in response to US incentives.
A report by the European Commission The report published last week said it is not yet clear what impact the US climate legislation is having on the EU economy and that Europe’s final package of clean energy incentives will determine the ultimate impact.
“The overall impact of the IRA on EU clean technology investment will also depend on the effectiveness of the EU’s response and its policies to improve its long-term competitiveness and technological edge,” the report said.