Germany and France present response proposal to U.S. green subsidy programme

A new concept for supporting Europe’s green energy industry in light of the U.S. government’s subsidy programme “Inflation Reduction Act” (IRA) has been presented jointly by the economy ministers of German and France, the Süddeutsche Zeitung reported. The ministers from Europe’s two largest economies, Robert Habeck from Germany and Bruno Le Maire from France, called on the U.S. government to amend the IRA that grants tax reductions for companies producing in North America in areas they regard as central to Europe’s industrial transformation towards a carbon-neutral economy. This was in both the EU’s and the U.S.’s interest and would safeguard “Europe’s industrial basis, especially in the strategically relevant green industries.” The ministers say tax rebates in the IRA framework for producers from Canada and Mexcio supplying the U.S. market should also apply to European companies. Habeck and Le Maire hope to rally support among other EU countries with their proposal, as high energy prices in Europe and subsidies in North America have raised fears about a large-scale migration of production capacity away from the EU. Besides leveling the playing field for European businesses in North America, the ministers want to introduce privileges for companies in the EU, the article said. Criteria for state contracts could be designed in a way that only European firms are able to comply, for example through tough recycling regulation and caps on CO2 emissions in production that are difficult to abide by for overseas suppliers. Moreover, Habeck and Le Maire call for changes to state aid rules, tax rebates and unlocking EU support money for climate-friendly investments, streamlining licensing procedures and guaranteeing purchases of green products, for example wind turbines. 

France and Germany had warned against a looming trade conflict with the U.S. in key areas of the energy transition already in November, arguing the IRA, although laudable for its clear focus on climate action, would pose grave dangers for Europe's industry and the transatlantic partnership. Media reports in mid-December said the potential for conflict could be significantly reduced, as the American government signalled its readiness to amend key aspects that would see some core demands of EU states fulfilled.