08 May 2023, 12:48
Julian Wettengel

Germany “already found” answer to U.S. inflation reduction act – econ min

Clean Energy Wire

Recent examples of investment decisions on climate-friendly technologies in Germany and Europe show that the continent is on the right track to respond to the U.S. Inflation Reduction Act (IRA), economy minister Robert Habeck said. “The news in recent months about private sector investments in central forward-looking and transformative sectors give us courage to believe that we are on the right track,” Habeck said at an event organised by Forum for a New Economy. “So, I think we already found an answer to the IRA.” Habeck cited several examples, including Varta, BASF and BMW, building battery cells in several German states; Infineon’s 5-billion-euro investment in chip manufacturing; Rheinmetall’ plans for a hydrogen centre; and the U.S. investment in heating company Viessmann. While the IRA is “highly welcome” because it helps the global transformation to climate neutrality, it poses a challenge to European economies, the minister said. “We can’t just sit there and watch this evolve.” Decarbonising industry could only be successful if there is enough private capital and if companies are able to plan ahead. However, aside from setting the right framework, there is also the need for government support, for example through contracts for difference, Habeck said, just days after proposing billions of euros in subsidies to supply certain industries with electricity at low cost.  

Germany and the European Union have been struggling to come up with the right reaction to green tech subsidies in the U.S. sparked by the IRA. The European Commission proposed a Green Deal Industrial Plan intended to enhance the competitiveness of Europe’s industry on the path to net-zero emissions. The plan would relax restrictions on how much state support EU countries can provide their companies, but also sets targets on the domestic manufacturing of green technologies.

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