Europe moves from anger to acceptance of US climate law

The tour is a marked change in tone from previous engagements. French President Emmanuel Macron accused the United States of “damaging” his country as Congress passed its landmark deflationary law.

European officials initially pressed President Joe Biden and senior US lawmakers to make the law more inclusive of European companies. The law provides $369 billion in subsidies and tax credits aimed at encouraging electric vehicle purchases and building green infrastructure. One of the most hotly contested provisions, a $7,500 electric vehicle tax credit, is limited to cars manufactured in North America and batteries with key minerals sourced domestically or from a free trade agreement partner — which is not the EU.

Habeck and Le Maire say they haven’t given up on that campaign. But amid uncertainty over how far the Biden administration would go to address their concerns, officials said the European Union, one of America’s most important trading partners, deserves at least a transparent accounting of how the U.S. government will use the law to funnel it. money in industry

“We agreed on the need for full transparency at the level of subsidies and tax credits,” Le Maire told reporters after the meeting, as well as “the need to ensure continuous communication at ministerial level, especially on the strategy regarding tax credits.”

“You cannot have fair competition unless there is full transparency in the level of public subsidies and government tax credits that are given to private companies,” he added.

But beyond promises of transparency and cooperation, the meetings with US officials do not appear to have produced any concrete agreement with the IRA to address the EU’s top concern – North American assembly requirements for subsidized electric vehicles.

Le Maire said the parties agreed in principle that “the implementation of the IRA should include as many EU elements as possible.” But he declined to elaborate on whether this meant the US changed the terms of the EV tax credit or whether they would try to maximize EU shares under existing parameters.

The economic dustup showed how complicated and potentially adversarial the race to a clean energy future will be. Even as they pursue their own interests, economies like the US and the EU have at least one shared goal beyond slowing climate change: making sure China doesn’t dominate battery production and renewables supply chains.

For their part, European countries are already creating their own subsidy schemes to prevent the dreaded shift of EU manufacturing to the US, where energy costs are lower and states are left with a sweet spot for food. After meeting with US officials, ministers said the need for Europe to respond with its own subsidy package was clearer than ever.

“One conclusion to be drawn from our meeting,” said Le Maire, “is that we see the absolute necessity to reach the definition and implementation of a European Green Technology Plan for Europe.”

US officials have encouraged the EU to grow its own industry, often noting that there is enough room in the market for government support for clean energy.

A Treasury Department readout of the meeting said Yellen “stressed the need to innovate and develop technologies on both sides of the Atlantic to accelerate the transition to green energy and meet our shared climate goals.”

The Treasury Department provided preliminary guidance in late December on how it was going to implement key features of the electric vehicle tax credits and promised full details in March. In a win for the EU, it signaled the adoption of a broader definition of which countries are considered US free trade agreement partners. It also said that imported electric vehicles would be eligible for a separate credit for commercial clean vehicles. However, many legal experts say the administration is unlikely to bend the law any further.

German and French officials emphasized their commitment to cooperate in creating a common market for many clean energy product components, with Habeck praising the creation of a “critical minerals club” among trading partners. France and Germany already agreed last year to join a “mineral security partnership” to strengthen key minerals supply chains.

“The idea is that we will find concrete measures … how we can reach more diversity in the supply chain,” Habeck said. “If that’s reached, we could have steps for more contracts, more alignment for products from important minerals.”

Habeck and Le Maire also met with Sen on Tuesday. Joe Manchin (DW.V.), who was instrumental in crafting the final details of the IRA, particularly the electric vehicle consumer tax credit.

Speaking at an online event hosted by news outlet Semaphore ahead of that meeting, Manchin defended the IRA bill as an important step toward achieving U.S. energy security and said it was not his or Congress’ intention to hurt Europe.

“We can basically get them to participate [in the IRA provisions]”Manchin said. “But every country does what they can to stimulate their markets, to keep their people working, to have a strong economy. They can’t deny us from doing the same.”

Manchin encouraged European officials to offer incentives to increase investment in clean energy and technologies to combat climate change. He expressed concern that the EU wants to “keep beating the living crap out of people with carbon taxes, carbon fees and everything. [else they’re] Basically, instead of incentivizing these industries to mature faster.”