Made in Europe? The EU to counterattack on US green subsidies

At the last summit of the year, EU heads of state and government called on the European Commission to propose measures to improve

and the

in response to

(IRA), considered discriminatory against European companies.

The IRA, passed in August this year, provides $367 billion in tax breaks and subsidies to boost US domestic production of electric vehicles, solar panels and batteries, for example.

For Brussels, these subsidies create

, as most EV manufacturers may relocate to the United States.

To date, over 25% of electric cars are produced in Europe, while only 10% are produced in the United States.

US law provides tax credits of $7,500 per vehicle for consumers who purchase electric cars, provided they meet two conditions: the first is that

used in the electric battery are sourced in the US or a country with which they have a trade agreement.

The EU and the US are big trading partners, but they don't have such an agreement.

By 2026, the threshold for tax credits will be raised to 80% of raw materials.

The other condition is that at least

is manufactured or assembled in the United States, Canada or Mexico and by 2029 this threshold will be raised to 100%.

The IRA also includes a generous program of incentives in other areas, such as new tax credits to promote

, clean hydrogen and

and the mitigation of greenhouse gas emissions.

In these areas, Europe is currently the world market leader.

“We have to deliver our response, our European wrath,” European Commission President

told the European Parliament last week.

A joint EU-US task force to resolve the critical points of the US plan identified by the EU has not yet produced the desired results.

Germany and France have asked for greater flexibility in EU rules on state aid for investments in the green sector, along the lines of the US model, and shorter approval times for decisions.

Paris and Berlin have also suggested holding future consultations between the US and the EU on the support granted to industry.

The central problem of the EU is that not all member states have the same

production.

Which could lead to a

even within the Union with consequent 

.

The Franco-German strategy, on the other hand, does not contemplate the Commission's proposal to set up a fund for European industry financed by joint EU loans.

Paris and Berlin want to draw on unused resources from the COVID-19 recovery fund, partner with the European Investment Bank (EIB) and develop EU capital markets to gain access to additional sources of finance.

One of the options is the new

Union to support the industrial and innovation programs of the 27.

While Washington and Brussels continue to negotiate possible measures to mitigate the impact on European businesses and avoid a trade war, the EU believes that measures are still needed to

Europe's competitiveness and investment attractiveness and reduce its dependency from third countries for essential supplies.

In the conclusions approved at last week's summit, the leaders stressed the importance of an "ambitious European industrial policy to prepare Europe for the ecological transition and reduce strategic dependencies (...) in the current global context".

The goal, it says, is "to safeguard Europe's economic, industrial and technological base" at a time of energy price shocks and to maintain Europe's "global competitiveness".

The EU's response to IRA could take shape at

, where the main themes will be immigration and the EU's global competitiveness.

Transatlantic cooperation will be one of Sweden's priorities, which will assume the presidency of the EU Council from January.

This article was produced with contributions from dpa, EFE, HINA, STA as part of the European Newsroom project.