U.S. and EU Work To Defuse Dispute Over Subsidies

"WASHINGTON -- The U.S. and Europe agreed to new steps aimed at resolving a spat over subsidies for clean-energy technology, an effort to preserve a trans-Atlantic relationship that had strengthened following events in Ukraine.

Since Congress passed the climate and healthcare law called the Inflation Reduction Act (IRA) last year, European officials have complained loudly about provisions they fear disadvantage their own industries. They have taken aim at U.S. subsidies for electric vehicles that impose new requirements on the source of the materials used in the vehicles, as well as a wider range of tax incentives that officials believe could draw investment out of Europe and into the U.S.

After a meeting at the White House, President Biden and European Commission President Ursula von der Leyen on Friday announced new initiatives to smooth over some of those concerns. They said they would formally begin talks on a new trade deal focused on critical raw materials, a step designed to allow minerals from Europe to meet a sourcing requirement for the electric-vehicle subsidies under the Inflation Reduction Act.

The two leaders also discussed Europe's own new plans to subsidize clean-energy technology. Biden administration officials had largely shrugged off earlier European demands to limit U.S. subsidies for clean energy, instead encouraging the EU to strengthen its own subsidies. The European Commission, the bloc's executive body, announced those plans on Thursday, saying they would make it easier for governments to offer tax breaks and other benefits to clean-tech companies and in some cases allow them to match subsidies offered in the U.S. or elsewhere.

"Indeed we welcome the Inflation Reduction Act because it is a massive investment in the green transition moving towards a net-zero economy," Ms. von der Leyen said Friday. "It is mirrored by the Green Deal industrial plan in the European Union."

The EU plans to allow matching subsidies for specific European clean-tech sectors that officials believe are at risk from the IRA, including solar panels, and wind turbine and battery manufacturing. The commission, which sought to limit the push by some member states for swift retaliatory action against Washington over the IRA, is also set to put forward legislation next week aimed at speeding up permitting and securing the raw materials needed to make clean-tech products.

Several European industry groups and companies said they were encouraged by the change in EU subsidy rules but were waiting to see how they will be applied.

The European Heat Pump Association, an industry group, said the new rules should put European companies on fairer footing with their U.S. counterparts.

Denmark-headquartered engineering company Danfoss A/S, which makes components for heat pumps, said the change should help the bloc catch up with the benefits Washington is offering through the IRA.

"The Americans know how to keep it simple, and we similarly need a faster and less-bureaucratic and fragmented support system in Europe," said Martin Rossen, the company's senior vice president for group communications and sustainability. He said he hoped the new state aid rules would be a step in that direction." [1]

 

America's policy here is clear: keep talking nice and handing out those wonderful bags of money to businesses. European hens and castrated roosters are still able to talk, but do not collect taxes into the common boiler, so a simple business subsidy program cannot be created by them. 

 

1. World News: U.S. and EU Work To Defuse Dispute Over Subsidies
Duehren, Andrew; Kim Mackrael.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 11 Mar 2023: A.8.