Saturday, June 15, 2024
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US Inflation Reduction Act raises “number of concerns”, says Commission President

The European Commission President, Ursula von der Leyen reiterated the EU’s ambition and strategy towards reaching climate neutrality by 2050, during a Special Address at the annual World Economic Forum in the Swiss town of Davos.

On the net-zero transformation, Ms von der Leyen said that the coming decades “will see the greatest industrial transformation of our times – maybe of any times”. In her view, those who develop and manufacture clean technology will have “the greatest competitive edge”. The Commission President underlined that Europe needs to become more “investment- and innovation-friendly” to gain a competitive advantage in the global clean technology industry. The industry is now – as highlighted by President von der Leyen – “the fastest-growing investment sector in Europe – doubling its value between 2020 and 2021 alone”.

As also noted by Ms von der Leyen, the International Energy Agency (IEA) estimated that the mass-manufactured clean energy tech market will be worth around 650 billion US dollars (600 billion euros) a year by 2030 – more than three times higher than the current figures.

Aiming for closer Transatlantic clean tech cooperation

Whilst touching on cleantech investments in other major economies, Ms von der Leyen said that “[…] it is no secret that certain elements of the design of the Inflation Reduction Act raised a number of concerns in terms of some of the targeted incentives for companies”. The Commission President added that both sides have been working to find solutions, including ways to ensure that EU-made electric vehicles (EVs) can also benefit from the US Inflation Reduction Act.

“Our aim should be to avoid disruptions in transatlantic trade and investment. We should work towards ensuring that our respective incentive programmes are fair and mutually reinforcing. And we should set out how we can jointly benefit from this massive investment, for example by creating economies of scale across the Atlantic or setting common standards,” said Ms von der Leyen. “At the heart of the joint vision is our conviction that competition and trade is the key to speeding up clean tech and climate neutrality. And that means that we Europeans also need to get better at nurturing our own clean-tech industry.”

“We have a small window to invest in cleantech and innovation to gain leadership before the fossil fuel economy becomes obsolete,” she added. “We see aggressive attempts to attract our industrial capacities away to China or elsewhere. We have a compelling need to make this net-zero transition without creating new dependencies. And we know that future investment decisions will be taken depending on what we do today.”

Emphasising the competitive threat of China – and drawing parallels to the rhetoric of the Biden administration – the Commission President said that “where trade is not fair, we must respond more robustly”. Adding that “[China] dominates global production in sectors like electric vehicles or solar panels, which are essential for the transition. But competition on net zero must be based on a level playing field. China has been openly encouraging energy-intensive companies in Europe and elsewhere to relocate all or part of their production. They do so with the promise of cheap energy, low labour costs and a more lenient regulatory environment. At the same time, China heavily subsidises its industry and restricts access to its market for EU companies.”

Nonetheless, the President of the EU’s executive body expressed openness to pragmatism.

“We will still need to work and trade with China – especially when it comes to this transition. So, we need to focus on de-risking rather than decoupling,” said Ms von der Leyen. However, she reiterated that “this means using all our tools to deal with unfair practices, including the new Foreign Subsidies Regulation. We will not hesitate to open investigations if we consider that our procurement or other markets are being distorted by such subsidies.”

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