EU Reacts to the Inflation Reduction Act

Last August, President Joe Biden signed a law that commits the United States to the greatest contribution the country has ever granted to the cause of climate change: the Inflation Reduction Act. This legislation, unprecedented in American history, aims to reduce inflation through a program that allocates large investments, among other objectives, towards achieving national energy security and promoting clean energy. Indeed about 391 billion dollars have been invested in domestic energy production and in interventions to fight climate change.

Thus it is not surprising that many are praising this law, which brings the country closer to achieving the standards and objectives set by the 2015 Paris Agreement and is predicted to bring to a 40% reduction in US greenhouse gas emissions by 2030 compared to the national levels of 2005. Yet not everyone is enthusiastic about the issuing of the Inflation Reduction Act.

Among the most judgemental we find the European Union. Indeed, many Ministers of the Economy of its member states have expressed their concern regarding the measures envisaged by this law and their detrimental effects on the global market. The huge subsidies granted by the US government sure enough risk redirecting large investments in the clean energy sector previously envisioned for the European market, to America instead. Furthermore there was a great outcry about the incentives to consumers to purchase electric cars, granted by the US government on condition that at least 40% of the battery components were produced in the United States or that the car was assembled in the country. This measure was deemed by many as an actual discrimination against European car manufacturers (some even claim it represents a violation of agreements within the World Trade Organization), and a serious risk of mass relocation of companies in the sector of electric cars.

In response, on the 1st February the European Commission presented the Green Deal Industrial Plan, a measure structured on four main points that aims to sustain the leadership of the European Union in the sector of cleantech, as well as granting competitiveness to European companies after the fallout of the Inflation Reduction Act. The first point of the plan concerns the presentation of a simplified regulatory system to zero European industrial emissions through the creation of the Net-Zero Industry Act, which will establish clear objectives and rules for the technology-producing industries in their green transition.

Secondly, the plan aims to ensure easy access to unemployed European funding, as well as the creation of a new European Sovereignty Fund, which will allow companies that produce electric vehicles to keep up with American ones. Finally, the last two points of the Green Deal concern the training of workers who will have to adapt to the innovations of their sector of employment and also the expansion of free trade agreements to secure the supply of raw materials necessary for this ecological transition. The steadfastness and importance of these measures adopted by the EU has shown its seriousness in its commitment to becoming the first continent producing zero environmental impact by 2050, as well as its resilience to the adversities that to no avail try to take it out of the international field of industrial development and trade.

Sources

https://www.esg360.it/cleantech/green-tech-leuropa-corre-ai-ripari-per-colmare-il-gap-con-gli -usa/

https://en.m.wikipedia.org/wiki/Inflation_Reduction_Act https://it.euronews.com/my-europe/2023/01/17/leuropa-prepara-la-risposta-allinflation-reduct ion-act

https://www.affarinternazionali.it/la-risposta-dei-paesi-europei-allinflation-reduction-act/ https://ec.europa.eu/commission/presscorner/detail/en/ip_23_510

https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook