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Petitioners in Washington:
Economics Minister
Robert Habeck
and his French counterpart
Bruno Le Maire
campaigned in the USA for a Europe-friendly application of the law
Photo: BRENDAN SMIALOWSKI / AFP
In August 2022, the US government around President
Joe Biden
(80) presented a multi-billion dollar subsidy package for climate protection.
The Europeans reacted enthusiastically at first, but finally the Americans, one of the world's largest emitters of CO2, finally invested in the development of climate-friendly technologies.
But now the mood has changed and a Green Minister of Commerce is traveling to the US to fight against green subsidies.
Why actually?
An overview of the most important questions and answers.
What is the Inflation Reduction Act (IRA)?
The Anti-Inflation Act was passed in August 2022 by the US government led by President Biden (80) in the fight against high inflation.
The climate protection and social package has a total volume of 430 billion dollars (400 billion euros).
A large part of this, around 370 billion dollars, is to flow into climate protection and energy security.
That would be the largest investment in the fight against climate change in US history.
On the one hand, the IRA is intended to reduce climate-damaging CO2 emissions by around 40 percent compared to 2005.
On the other hand, the government also expects additional revenue that should reduce the budget deficit by more than $300 billion.
This should then also combat the high inflation, which had risen dramatically in the past year, similar to that in Europe.
The whole thing is to be financed by a minimum tax for large companies of 15 percent and a strengthening of the US tax authority.
Who Benefits from the IRA?
Companies that invest in clean energy should pay less tax.
At the same time, electric cars and batteries made in the USA are being subsidized.
The purchase of an electric car "Made in the USA" with a battery also made in the USA is subsidized with around 7,500 dollars.
Subsidies also flow to companies that make wind turbines or solar panels with US steel.
Why is the law met with criticism in the European Union?
The EU states feel disadvantaged by the law.
They fear that European companies will be attracted by the subsidies and the lower energy costs there and will migrate to the USA.
In response to the IRA, EU Commission President
Ursula von der Leyen
(64) presented the "Green Deal Industrial Plan" at the beginning of February.
The plan envisages allowing member countries more state aid and tax breaks for green technologies.
How is German industry reacting?
The USA is the most important sales market for the export-oriented German economy.
Nevertheless, Employer President
Rainer Dulgur
(58) warns of a subsidy race with the USA.
The IRA does not rely on government regulation, but on incentives: "I think that's the better way for an economically oriented society."
The German car industry, which was particularly affected, reacted much more violently.
"The discriminatory regulatory approach chosen by the USA is in contradiction to an open trade in goods, criticized
Hildegard Müller
(55), chairwoman of the German Association of the Automotive Industry (VDA). The association fears above all the IRA specifications in relation to car batteries: To yourself To qualify for part of the tax credit, 40 percent of a battery's critical minerals must be imported from the U.S. or a country with which the U.S. has a free trade agreement.There is currently no such free trade agreement with Germany.The EU Commission and The German federal government is currently working under high pressure to build large battery factories in this country.
The German car manufacturers are already reacting with the emigration feared by the governments - not least because of the rising transport and logistics costs - and are ramping up the production of electric cars in the USA.
For example, VW builds the ID.4 in Chattanooga, Tennessee, and Mercedes builds the EQS and EQE SUV in Tuscaloosa, Alabama.
BMW plans to produce at least six all-electric models in Spartanburg, North Carolina by 2030.
What do economists say about this?
The German Institute for Economic Research (DIW) has just come to the conclusion in an analysis that the law will be difficult to implement in the short term.
After all, the subsidized companies are not allowed to purchase any preliminary products from countries with which the USA does not have a free trade agreement.
"So far, 76 percent of the critical raw materials come from countries without a free trade agreement with the USA," says the DIW study.
"And more than half of selected green technologies such as photovoltaics, wind turbines or lithium batteries come from non-free trade countries."
The USA would have to move here in order to continue to cover its needs.
For Germany and the EU, there are still opportunities to change the regulations.
Are there already exceptions?
The EU has already been able to defuse the most problematic part of the IRA for the German auto industry.
Leasing vehicles that are imported into the USA now also benefit from the government subsidy.
This is an extremely important achievement for VW, BMW and Mercedes-Benz, since more than half of the cars exported are leased vehicles.
However, there are also exceptions to the IRA for companies from Canada and Mexico, as they have a free trade agreement with the USA.
EU Commission President Ursula von der Leyen is calling for equal rights here and wants to obtain these exceptions for the EU member states as well.
What did Habeck and Le Maire achieve?
Federal Minister of Economics
Robert Habeck
(53) and his French counterpart
Bruno Le Maire
(53) traveled to Washington on Tuesday to appeal to US President Joe Biden for a Europe-friendly application of the law.
As both ministers made clear in advance, the trip was more of a "working visit".
That's how it was, Habeck and Le Maire returned without any concrete promises about future market access for European companies.
According to their own statements, they have achieved, above all, commitments for more transparency about the extent of state support in the USA.
A working group is to be set up here in which both countries can exchange their interests.
How is the US government responding to the criticism?
US President Biden made it clear again on Tuesday evening in his State of the Union address that he stands behind the IRA.
"We're going to make sure the supply chain for America starts in America."
This is entirely in line with international trade rules.
Biden's law was negotiated in a tough process with concessions, so subsequent changes are out of the question for him.
At the end of January, the US President made his opinion on the international criticism clear: "I'm being criticized internationally for concentrating too much on America. To hell with it."
How does it go from here?
The EU and the US have set up a working group to settle the dispute.
In Europe, there is still hope for more favorable application rules for the law that has been passed, which the US Treasury Department in Washington is currently working on.
There is apparently still room for maneuver in terms of the vehicles that are eligible for the tax breaks.
In addition, the directive for renewable energies is still pending.
Here the subsidies on the US side could be so high that a negative price arises.
Germany and the EU want to prevent that.
In addition, the exemptions for Mexico and Canada remain in focus.
These could still apply to critical raw materials for solar panels, batteries or semiconductors from EU countries, among other things.
Despite all the discrepancies, Chancellor Olaf Scholz (64) will not risk everything to protect domestic industry, as he made clear again on Wednesday.
"An uninhibited subsidy race would certainly be the wrong approach," Scholz warned in his government statement.
With news agencies
