EU raises fears over 'discriminatory' US green stimulus package

Some countries want to file a complaint at the World Trade Organisation

Washington's Inflation Reduction Act has provoked fury in Europe, where countries such as France and Germany fear it will block non-US electric vehicles from American markets. Bloomberg
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The EU has raised protests with the US, fearing that Washington’s latest green energy package is freezing European businesses out of the world’s richest market.

Brussels made a number of demands for changes in a submission to the US administration last week and the showdown will top the agenda at a meeting of EU finance ministers on Tuesday.

European Commission Executive Vice President Valdis Dombrovskis said that European finance and economy ministers would discuss Washington’s “discriminatory” green energy incentives amid heightened fears of an economic contraction gripping the continent this winter.

Approved by US politicians in August, the Inflation Reduction Act invests hundreds of billions of dollars into fighting climate change and includes a $10 billion investment tax credit for clean energy products such as electric vehicles.

The Inflation Reduction Act has provoked fury in Europe, where countries like France and Germany fear that it would block non-US electric vehicles from its markets and further weaken the competitiveness of European companies that are already suffering from sky-high energy prices.

The European Commission on Friday sent a document to the US Treasury detailing its preliminary views on the act, which it said contains “problematic elements”. The document is expected to be published soon on the US Treasury’s website.

The commission called on the US to remove “all discriminatory content and production requirements affecting the EU and its economic operators and products” and ensure “that the level and structure of subsidisation does not create adverse effects on the EU”.

The document also asked the US to ensure that EU companies were treated “no less favourably than other trading partners of [the] US” and to build “transparency provisions into subsidies to be granted through tax credits and other programmes” under the Inflation Reduction Act.

The commission’s spokeswoman for trade and agriculture, Miriam Garcia Ferrer, told The National that the EU reserves the right to complement its views at a later stage. She said that the EU hoped to find “constructive and amicable solutions”.

Negotiations are continuing within an EU-US task force which met for the first time last Friday. Ms Garcia Ferrer described the task force as a “clear, senior-level commitment by the US to address the serious concerns raised by the EU” related to the act.

But some European countries have taken a more aggressive stance than the commission, with France’s Energy and Finance Minister Bruno Le Maire calling for a formal complaint at the World Trade Organisation.

“Europe must defend its interests. No one will give it any favours, neither China nor the US,” he said in an interview to several European media outlets published on Monday.

Quoted by French newspaper Les Echos, Mr Le Maire said that he expected a “firm” reaction from the European Commission, including for example “European preferential schemes”.

Mr Le Maire claimed that the Inflation Reduction Act discouraged international companies that were previously interested in working in Europe and that they are considering moving to the US instead.

The value of subsidies offered by the US administration is in certain cases four to 10 times higher than the maximum authorised by the commission, Mr Le Maire said.

“In France, our preliminary estimates show that €10 billion [$9.9 million] in investments and thousands of jobs are at stake,” he said.

Updated: June 21, 2023, 6:27 AM