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IRA subsidies: Dispute about "Climate protection made in USA" comes to a head


The dispute over billions in US subsidies for green technologies continues: Federal Minister of Economics Habeck travels to Washington on Monday and Tuesday. The United States' climate protection and social package is causing resentment in Europe.

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US President Joe Biden: $370 billion in subsidies for climate protection "made in the USA"

Photo: Brian Snyder / REUTERS

During Habeck's visit to Washington, US President Joe Biden's multi-billion dollar climate protection and social package, known as the Inflation Reduction Act (IRA), should be the central topic.

It is considered a milestone in the fight against global warming, but has met with massive criticism in the EU because of the billions in subsidies for US producers.

The most important questions and answers about the IRA at a glance.

What exactly is the Law of Reducing Inflation?

The name is misleading: the law is primarily about

massive investments in climate protection and the health sector


The package has a total volume of around $430 billion, of which $370 billion is earmarked for climate protection and energy security - the largest investment in the fight against global warming in US history.

The package is financed, among other things, by higher taxes for large companies and a strengthening of the tax authority IRS


According to the Biden government, the expected additional revenue should reduce the budget deficit and thus also inflation.

Hence the name of the law, which was also politically opportune in view of a dramatic increase in consumer prices last year.

What subsidies does the law contain?

The investments in climate protection consist, among other things, of tax cuts for companies that invest in clean energy.

There are also subsidies for electric cars, batteries and renewable energy projects made in the USA.

For example, the purchase of an electric car "Made in USA" with a battery also made in the USA is subsidized with 7500 dollars


Subsidies also flow to companies that make

wind turbines or solar panels with US steel


How are the Europeans reacting?

The EU Commission and the

EU member states accuse Washington of trade protectionism and discrimination against European companies

and fear

that companies from the EU could migrate to the USA


In response, EU Commission President

Ursula von der Leyen

wants to allow member states more state aid and tax breaks for "green" technologies.

She presented a corresponding

"Green Deal" industrial plan

on Wednesday.

The federal government and especially the FDP and SPD are critical of massive EU subsidies.

In particular, they reject

joint borrowing

and warn against a subsidy competition.

Above all, Berlin is relying on further talks with the US side to obtain special regulations for European companies.

What changes to US law are possible?

The EU and the US have set up a working group to settle the dispute.

Brussels is hoping for

derogations for certain EU industries, like the US is already granting to Mexico and Canada


However, the scope for this is small.

Supporting US industry is popular in the country and even if President Biden were to accommodate Europeans, it would be extremely complicated given the opposition Republican majority in the House of Representatives.

The EU Commission still sees movement in Washington.

In late December, the agency said it had been urged by the United States to include an opening in the fine print of the IRA for European automakers on leases.

'EU companies that lease state-of-the-art green vehicles to their customers can benefit from the incentives under the IRA,' it said.


Source: spiegel

All news articles on 2023-02-03

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