Tuesday, March 19

Brussels responds to Biden’s massive aid against inflation and is committed to facilitating public investment

The European Commission responds to Joe Biden. And it is committed to more “public investment” in response to the massive US aid against inflation contained in its Inflation Reduction Act (IRA), an investment plan of approximately 370,000 million dollars to build a new industrial ecosystem in strategic sectors. of clean energy.

“However, the Inflation Reduction Act also raises concerns here in Europe,” said the President of the European Commission, Ursula von der Leyen, in a speech at the College of Europe in Bruges on Sunday.

Von der Leyen has highlighted the “very particular context” for the European industry and economy in which this US standard has been approved: “First, COVID-19 has exacerbated bottlenecks in many critical supply chains. Second, the world’s energy supply is in short supply due to Russia’s war of aggression. It is in this context that the Inflation Reduction Act has received so much additional scrutiny in Europe, but also in the rest of the world. There is a risk that the IRA could lead to unfair competition, close markets and fragment the very critical supply chains that have already been tested by COVID-19.”

“If you are a consumer in the United States, you get a tax break when you buy electric vehicles (EVs) if they were made in North America,” von der Leyen reasons: “And if you are a producer of batteries for those same electric vehicles, You get a tax break if you produce in the US. This means that a car manufacturer gets a double benefit for producing in North America and buying parts in the US. Furthermore, this could also draw critical components and raw materials into the US, away from transatlantic supply chains.”

Von der Leyen adds: “This of course creates an attractive cleantech investment environment in the US. But we already see how this could also affect Europe’s own cleantech base by redirecting investment flows. We’ve all heard stories of growers considering moving future investments from Europe to the US. Competition is good. It drives innovation, improves efficiency and ensures progress. And by doing so, it lowers the prices of clean technologies. Competition between Europe and the United States can drive both industries to excel, innovate and transform faster. But this competition must respect the level playing field. That is why it is so critical that the EU-US technology competition be a race to the top for our industries on both sides of the Atlantic.”

“But will this be enough to keep up with the clean technology race?” asks the president of the Community Executive: “And to strengthen our industrial base, do we need to do more to speed up the transition? Yes, if we are competing on equal terms. But we must also take steps to rebalance the playing field where the IRA or other measures create distortions. In other words: we need to do our homework in Europe and at the same time work with the US to mitigate competitive disadvantages.”

Von der Leyen lists three ways to do it: “First, we have to adjust our own rules to facilitate public investments in the transition. Secondly, we need to reassess the need for more European funding for the transition. Third, we have to work with the United States to address some of the most troubling aspects of the law.”

“We have to adjust our own rules to make it easier for public investments to drive the transition”, the German abounds: “State aid is a proven tool here in Europe to encourage business activities in the public interest. However, the Inflation Reduction Act should make us reflect on how we can improve our state aid frameworks and adapt them to a new global environment. First, we need to look at how we can make our frameworks more predictable and simple. But companies today want state aid rules to be predictable, above all. We are very careful to avoid distortions in our single market. But we must also be receptive to the growing global competition in clean technology. If you look at the IRA, it invests along the value chain in some strategic sectors. But this is not always the case with our state aid. Our Common European Major Projects, IPCEI, for example, aim to bring innovative technologies from the lab to their first steps. Our state aid frameworks exist to preserve our precious Single Market. But if investments in strategic sectors leak out of Europe, this would only undermine the single market. And that is why we are reflecting on how to simplify and adapt our rules on state aid”.

Regarding complementary European financing, Von der Leyen affirms that the EU needs “a common European response to the challenge, both in the short and medium term. In the short term, we have to save the difficult moment of the transition of our SMEs and industries towards renewable and cheaper energy throughout the EU. However, we must also think beyond ad hoc solutions. The new assertive industrial policy of our competitors requires a structural response. The underlying logic is simple: a common European industrial policy requires common European funding. This means, on the one hand, new and additional funding at EU level. And on the other hand, a higher level of coordination of policies, such as hydrogen, semiconductors, quantum computing, AI and biotechnology”.

Of course, Von der Leyen also calls for “cooperation instead of confrontation. We are working closely with the Biden administration on how to jointly strengthen our clean energy industrial foundations. Europe and the US can build an alternative to this monopoly [de China] establishing a club of fundamental raw materials. The idea behind it is simple: cooperation with partners and allies in sourcing, production and processing gives us the ability to break monopoly.”




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