COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL Report on EU policy initiatives for the promotion of investments in clean technologies (Preliminary assessment of measures taken by the EU to stimulate investment into clean technologies and the impact of the US Inflation Reduction Act on investment)
Date: 2023-10-24
Institutions: European Commission, Secretariat-General
Subjects: EU investment, United States, carbon neutrality, clean technology, climate change, competitiveness, green economy, inflation, investment abroad, investment promotion, private investment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.10.2023  COM(2023) 684 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL Report on EU policy initiatives for the promotion of investments in clean technologies               (Preliminary assessment of measures taken by the EU to stimulate investment into clean technologies and the impact of the US Inflation Reduction Act on investment)  
 
 
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL  

Report on EU policy initiatives for the promotion of investments in clean technologies 

(Preliminary assessment of measures taken by the EU to stimulate investment into clean 
technologies and the impact of the US Inflation Reduction Act on investment) 

1.  Context  

Clean technologies play a key role in our green transition and tackling climate change 
and biodiversity loss. Their increased  availability  is  an essential condition for a successful 
implementation of the Green Deal. According to the International Energy Agency, the  global 
market for clean tech equipment is set to triple by 2030 to around EUR 600 billion annually.1  

The development and production of advanced clean technologies require a diverse set of inputs, 
ranging  from  critical  raw  materials  to  microchips,  a  skilled  labour  force,  research  and 
innovation,  considerable  public  investments  as  well  as  a  system  of  incentives  to  crowd-in 
private investments and build a business case across key value chains.   

Under the overall umbrella of its Green Deal ambition, and through a smart policy mix, 
the  EU  has  been  building  a  growth-enhancing  regulatory  framework  and  business 
environment that is favourable to the development, production and deployment of clean 
technology.  The  EU  has  shown  that  economic  growth  can  be  achieved  while  reducing 
greenhouse gases and resource use – and will continue to do so2. The Green Deal Industrial 
Plan will enhance the competitiveness of Europe's net-zero industry, create quality jobs and 
support the fast transition to climate neutrality, by ensuring a more predictable and simplified 
regulatory environment,  speeding up access to finance, enhancing skills,  and open trade for 
resilient supply and value chains. 

The  world  is  engaged  in  the  search  for  the  best  technologies  to  improve  climate  and 
environmental  sustainability.  Governments  throughout  the  world  are  adopting  policy 
measures to mitigate their excessive dependencies, to support strategic supply chains vital for 
the decarbonisation of the economy and to secure significant parts of the clean technologies 
market.  The  EU  has  been  spearheading  global  climate  action  and  has  been  instrumental  in 
setting  ambitious  international  objectives,  such  as  the  recent  G20  commitment  to  triple 
renewable energy capacity  by 2030. The EU therefore welcomes and encourages efforts  by 
international partners to fight climate change and cooperates closely at the international level.  

This is happening against a backdrop of successive crises and growing geopolitical tensions 
that  have  changed  the  international  context  to  these  endeavours  by  exacerbating  both  the 
fragmentation and fragility of supply chains. In this context, it is important to ensure that state 
measures designed to facilitate the development of clean tech industry are developed in a spirit 
of  mutual  benefit  and  lead  to  a  positive  sum  game  at  global  level,  without  tilting  the  level 
playing-field or distorting trade relations amongst countries. More specifically, the EU must 
make sure that these efforts in different countries do not undermine the competitiveness of the 
Europe’s industry and the resilience of its energy transition and supply.  

1 International Energy Agency (IEA), Energy Technology Perspectives, 2023 
2  European  Commission,  Long-term 
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1668 

competitiveness 

of 

the  EU 

looking 

beyond 

2030, 

1 

 
 
 
 
 
 
 
 
 
The  EU  is  therefore  diligently  monitoring  developments  around  the  globe  as  well  as 
enhancing  its  own  capabilities  to  keep  up  its  competitiveness  in  the  fast  evolving  and 
rapidly  growing  field  of  clean  technologies.  This  Communication  offers  a  preliminary 
assessment of the state of play and sets out what the EU has done to promote and support the 
development and deployment of clean technologies, reinforcing the Single Market, ensuring a 
level-playing  field,  supporting  research  and  innovation,  expanding  its  network  of  trade 
agreements  and  international  strategic  partnerships,  and  mitigating  the  impact  of  external 
developments.  

This  Communication  will  also  look  at  first  results  materialising  from  the  U.S.  Inflation 
Reduction Act, as requested by the European Council3. However, it is important to underline 
that other actors, notably China, also have active public support programmes in place that are 
likely  to  have  a  larger  impact  on  the  competitiveness  of  the  EU  clean  tech  sector.  The 
Commission has recently launched an anti-subsidies investigation into electric vehicles coming 
from China and will remain vigilant in other clean tech sectors. The Commission will assess 
all evidence of alleged unfair practices put forward by the industry or from other independent 
sources. 

2.  EU measures to improve the business and investment conditions within the Single 

Market    

The EU has long been investing in the green transition and in industrial decarbonisation. 
This reflects its climate ambition, but also its aim to reinforce its competitiveness and its open 
strategic autonomy. According to the International Energy Agency, currently only half of the 
technologies necessary to achieve full decarbonisation are ready for the market. Therefore, the 
EU will continue to invest in research and innovation activities.. 

EU and Member States’ funding and regulatory framework focus on creating a long-term 
stable  supply  and  demand  environment.  They  are  in  line  with  WTO  rules,  non-
discriminatory and transparent, address market failures and strive for a careful balance in order 
to crowd-in private investments while preserving the integrity of the Single Market, bearing in 
mind differences in Member States’ size and fiscal capacity. 

The EU acts to create the right conditions for development of clean tech products and 
solutions  and  takes  the  necessary  measures  to  promote  cost-efficient  industry 
decarbonisation, in order to remain competitive and respond to the demands created by the 
green  transition.  In  a  similar  vein,  the  Commission  has  also  adopted  today  a  package  of 
comprehensive measures to stimulate the wind industry in Europe, to address the challenges 
that the sector is facing and ensure a level-playing field with EU trading partners. 

Incentives and predictability.  

The  EU  has  developed  a  consistent,  coherent  and  ambitious  regulatory  framework  to 
make  Europe  the  first  climate-neutral  continent  by  2050.  As  part  of  the  “Fit  for  55” 
package, the EU is the first economy to have set regulatory targets to achieve the sale of only 
zero-emissions cars and vans by 2035. It also has a series of other objectives to reduce pollution 
and  make  its  economy  more  circular.  Through  a  market-based  carbon  price  signal,  the 
Emissions Trading System (ETS) serves as an incentive to invest in clean technologies and 

3 https://data.consilium.europa.eu/doc/document/ST-7-2023-INIT/en/pdf  

2 

 
 
 
 
 
  
 
 
reduce emissions, whilst the Carbon Border Adjustment Mechanism (CBAM) is preventing 
carbon leakage.  

Widespread access to affordable electricity is an essential pre-requisite for the competitiveness 
of EU industry. The revised Renewable Energy Directive (RED) and the Net Zero Industry 
Act will provide a predictable business environment fostering deployment and investments in 
clean technologies. The reform of the EU electricity market design will enhance predictability 
and  stability  of  energy  costs  to  boost  industrial  competitiveness.  The  new  EU  regulatory 
framework for batteries is also crucial to the EU's transition to a climate neutral economy, 
by securing competitive, resilient and circular value chains for battery production, reuse and 
recycling in the EU. The proposed Ecodesign for Sustainable Products Regulation will further 
mainstream circularity across strategic industry groups. 

The Commission is gradually reducing red tape and administrative burden and has acted 
to simplify and accelerate permitting for projects. In 2022, the Commission adopted policy 
proposals that are expected to lighten the overall administrative burden for EU businesses by 
EUR 7.3  billion,  in  particular  through  digital  and  interoperable  solutions.  Moreover,  the 
Commission has already started the rationalisation of reporting requirements with a view to 
progressively reduce them by 25%. It has adopted a significant number of relevant proposals 
following  the  Commission’s  Communication  on long-term  competitiveness  of  the  EU  from 
March 2023  and makes  rationalisation of reporting requirements a prominent  feature of the 
2024 Commission work programme. 

EU investment.  

Public resources from the EU and Member States alone will not be able to cover to the funding 
gap for clean technology investments in the EU. But they are the essential catalyst to crowd in 
needed additional private funding for the decarbonisation of our energy systems, our industries 
and our economy at large.   

The EU budget actively supports green technologies. Over the course of 2021-2027, the EU 
budget is projected to contribute EUR 578 billion to climate spending, representing 32.6% of 
the total EU budget. This includes the support under the Recovery and Resilience Facility for 
investments  in  green  projects,  as  well  as  for  reforms  that  provide  an  effective  enabling 
framework for the deployment of green technologies.  

Other relevant funds and programmes include  cohesion policy funds, InvestEU, or the EU 
research and innovation programme - Horizon Europe, including its partnerships, missions 
and  the  European  Innovation  Council.  The  REPowerEU  chapters  in  national  recovery  and 
resilience plans support Member States, putting forward additional reforms and investments to 
foster the manufacturing  and  roll-out  of net-zero technologies  and  renewables. Financed by 
revenues  of  the  EU  Emissions  Trading  System,  the  Modernisation  Fund  co-finances 
investments to speed up the energy transition in Member States with lower GDP per capita.  

In July 2023, the EIB increased by 50% its REPowerEU package approved in October 2022 
(from EUR 30 billion to EUR 45 billion). This entails an estimated mobilised investment for 
the increased package of more than EUR 150 billion. This REPowerEU package will channel 
loans and equity financing over the years 2022-2027. The additional funds will be directed to 
renewables, energy efficiency, grids and storage, electric-vehicle charging infrastructure, and 
breakthrough technologies, such as low-carbon hydrogen. 

3 

 
 
 
 
 
 
Also  financed  by  the  EU  Emissions  Trading  System,  the  Innovation  Fund  is  one  of  the 
world’s  largest  funding  programmes  targeting  specifically  industrial  decarbonisation  and 
scaling up clean tech manufacturing. Since its inception in 2021, more than EUR 6.5 billion 
funding has been committed, with total capital investments approximately a factor of 4 higher. 
The  selected  projects  under  the  Innovation  Fund  contribute  up  to  17%  of  the  production 
capacity  objectives  set  in  the  Net  Zero  Industry  Act  for  solar,  batteries  and  electrolysers, 
creating quality jobs and growth in Europe. In November 2023, a new call will be launched 
with  a  budget  of  EUR  4  billion,  out  of  which  EUR  1.4  billion    is  reserved  for  clean  tech 
manufacturing.  

The Commission will launch this November the first ever EU- wide auction dedicated to 
the  production  of  renewable  hydrogen,  with  a  budget  of  EUR  800  million  from  the 
Innovation Fund. The Commission has proposed to extend the auction as a platform to Member 
States (Auction as a service), enabling them to use their own resources for projects on their 
territory by relying on this EU-wide auction mechanism. The Commission has also announced 
the  European  Hydrogen  Bank,  with  the  objective  to  scale  up  the  production  of  domestic 
renewable hydrogen in the EU. 

Moreover,  the  proposed  “Strategic  Technologies  for  Europe  Platform”  (STEP),  once 
adopted,  will  reinforce  and  leverage  existing  EU  instruments  for  a  quick  deployment  of 
financial support for the development or manufacturing in the Union of critical technologies in 
several  fields,  including  clean  technologies.  European  industrial  policy  also  requires  some 
common European funding. While the STEP relies on the reprogramming and reinforcement 
of existing programmes for supporting strategic investments, it is also an important element for 
testing  the  feasibility  and  preparation  of  new  interventions  as  a  step  towards  a  European 
Sovereignty Fund. 

Private investment. 

A  conducive  EU  regulatory  environment  helps  effectively  raise  and  channel  private 
financing  towards  economic  activities  that  contribute  to  decarbonisation.  Deep  and 
integrated EU capital markets and an effective sustainable finance framework are essential pre-
requisites  for  fully  mobilising  the  vast-amount  of  private  funding  necessary  for  the  green 
transition. The EU Taxonomy, for instance, provides a unifified framework for investors in 
supporting the development of clean technologies.  

A  genuine  Capital  Markets  Union  (CMU)  can  also  provide  clean  tech  companies  with 
opportunities to access larger and deeper pools of funds from a broader range of investors and 
diversify  their  sources  of  funding.  The  Commission  has  tabled  all  the  planned  legislative 
proposals under the 2020 CMU Action Plan to tackle barriers that continue to fragment EU 
capital  markets  along  national  lines  and  hold  back  the  single  market  for  capital.  The 
Commission  encourages  the  swift  adoption  by  the  co-legislators  of  the  pending  CMU 
proposals. The CMU is not a ‘nice to have’ but a ‘must have’ in order to complement public 
funding  to  finance  the  green  transition  and  ensure  the  competitiveness  of  the  clean  tech 
industry. The swift adoption by the co-legislators of the pending proposals would help improve 
access  to  finance,  diversify  sources  of  funding  for  companies,  tackle  structural  obstacles  in 
cross-border financial services and address risks to the EU’s financial stability. 

4 

 
 
 
 
 
National public investment.  

While the private sector will take on the major share, public investment has a crucial role to 
play to de-risk innovative ventures and correct market failures. The new security challenges, 
inflationary pressures and the investments needed to deliver on the green and digital transitions 
have also put extra pressure on national budgets. This highlights the need to swiftly agree on 
the reform of the EU’s economic governance framework.  

State aid policy provides numerous possibilities to support clean investments at national 
level. The Guidelines on State aid for Climate, Energy and Environmental Aid (CEEAG), the 
Temporary  Crisis  and  Transition  Framework  (TCTF)4,  the  Regional  aid  Guidelines  and  the 
General Block Exemption Regulation all provide Member States with a wide range of tools to 
support clean investments while protecting the level playing field. The latest amendment of the 
TCTF in March 2023 gave EU Member States even more flexibility to support investments in 
manufacturing  in  strategic  sectors,  i.e.  batteries,  solar  panels,  wind  turbines,  heat-pumps, 
electrolysers and carbon capture usage and storage, as well as in the production and recycling 
of  their  key  components  and  critical  raw  materials,  with  support  possibilities  aligned  with 
Single Market and cohesion objectives.  

Since  March  2023,  the  Commission  has  approved  schemes  set  up  by  several  Member 
States5  for  a  total  budget  of  around  EUR  6.9  billion  as  regards  investment  in  clean 
technologies and is currently assessing additional ones. In exceptional cases, Member States 
have the possibility to provide higher support to individual companies, where there is a real 
risk  of  investments  being  diverted  away  from  Europe  due  to  third  country  subsidies. 
Furthermore, as part of the TCTF the Commission provided additional possibilities for Member 
States to support schemes for accelerating the rollout of renewable energy and energy storage, 
and schemes for the decarbonisation of industrial production processes. On this basis, since 
March 2023 the Commission has approved eight schemes in several Member States6 for a total 
budget of around EUR 17 billion and is currently assessing additional ones.  

Separately,  under  the  Climate,  Energy  and  Environmental  Aid  Guidelines  (CEEAG), 
Member  States  can  support  the  installation  of  wind  and  solar  power  generation,  or  of 
electrolysers to  produce  renewable hydrogen or to support the decarbonisation of industrial 
production processes. Thus far, this has resulted in  the Commission  approving  aid  schemes 
with  an  overall  budget  of  EUR  88.9  billion  to  deliver  new  renewable  energy  production 
capacity and to unlock other decarbonisation initiatives.  

The  Commission  has  also  approved  State  Aid  under  relevant  Important  Projects  of 
Common  European  Interest  (IPCEIs)  designed  by  Member  States.  For  instance,  two 
IPCEIs on batteries, have been launched with a total of EUR 20 billion of public and private 
investment in 68 projects throughout the EU. Likewise, two IPCEIs on hydrogen, have been 
approved with public and private investments for a total of EUR 26.4 billion for 76 projects 
across the EU7, with another two in the pipeline being reviewed as a matter of priority.   

4 The new Framework of 9 March 2023 amends and prolongs in part the Temporary Crisis Framework, adopted 
on 23 March 2022, to enable Member States to use the flexibility foreseen under State aid rules to support the 
economy in the context of Russia's war against Ukraine.  
5 Germany, Hungary, Italy, and Spain. 
6 Czechia, France, Lithuania, Hungary, Ireland, Italy, Slovenia. 
7 These IPCEIs involved a collaborative investment effort by 12 Member States in the case of batteries and 16 
Member States in the case of hydrogen. 

5 

 
 
 
Finally, the EU Emission Trading System generates sizeable revenues that Member States 
can use to invest in clean technologies including at the manufacturing stage. In 2022 alone, 
Member States received EUR 29.7 billion in ETS auction revenues. All revenues must be spent 
on  climate-related  purposes,  including  innovation  and  manufacturing  in  low-carbon 
technologies and solutions in a wide range of areas. 

Cooperation with stakeholders.  

Industrial  Alliances8  like  the  European  Battery  Alliance  and  the  Clean  Hydrogen 
Alliance  played  an  important  role  in  gathering  a  wide  range  of  partners  in  a  given 
industry  or  value  chain,  including  public  and  private  actors  and  civil  society,  to  facilitate 
stronger cooperation, joint action and common projects.  

The  EU  will  seek  to  enhance  consultation  of  the  social  partners  on  such  ways  to  support 
businesses and workers to drive our transition to climate neutrality. 

As  announced  by  President  von  der  Leyen  in  her  2023  State  of  the  Union  speech,  the 
Commission committed to holding a series of Clean Transition Dialogues with industry on 
what it will take for them to invest and keep investing in Europe. These dialogues are following 
a supply chain logic and are putting a special emphasis on small and medium-sized enterprises 
(SMEs), with the first clean transition dialogue dedicated to hydrogen already held this October 
2023.  

Skills.  

The green transition will also require a skilled workforce. Building on previous experience, 
“Net-Zero Industry Academies” complement the objective set out in the 2020 Skills Agenda 
to ensure that the EU workforce has the skills it needs to drive the twin transitions. This is also 
the specific focus of the European Year of Skills (9 May 2023 to 8 May 2024). 

Resilience and competitiveness.  

The Commission’s Green Deal Industrial Plan aims at safeguarding the competitiveness 
of  the  European  clean  tech  industry  and  at  positioning  Europe  as  a  leader  of  industrial 
innovation. In particular, the Net-Zero Industry Act proposal aims to tackle barriers to the 
scaling up the European manufacturing capacity of net-zero technologies. For example, it sets 
a manufacturing capacity benchmark of 40% of the EU’s annual deployment needs by 2030 
for  strategic  clean  technologies.  It  also  considerably  streamlines  permitting  procedures  for 
strategic projects across different sectors and supply chains to synchronise the scaling of clean 
tech in Europe. It further facilitates access to markets for clean technology with high quality, 
resilience, environmental and social standards by ensuring that public procurement procedures, 
auctions and consumer incentives schemes include resilience and sustainability criteria. It also 
makes it possible for Member States to set up regulatory sandboxes to test innovative net-zero 
technologies and stimulate innovation, under flexible regulatory conditions. 

The Critical Raw Materials Act will bring further certainty for industry in Europe, including 
through a focus on boosting sustainable domestic mining, processing, refining and recycling 

8  They  include,  amongst  others,  the  European  Battery  Alliance,  the  European  Raw  Materials  Alliance,  the 
European  Solar  Photovoltaic Industry  Alliance,  the  Clean Hydrogen  Alliance,  the  Alliance  for  Zero-Emission 
Aviation,  the  Circular  Plastics  Alliance,  and  the  Renewable  and  Low-carbon  Fuels  Value  Chain  Industrial 
Alliance. See https://single-market-economy.ec.europa.eu/industry/strategy/industrial-alliances_en 

6 

 
 
capacities of critical raw materials. It foresees that no more than 65% of the EU’s annual needs 
of a strategic raw material at any relevant stage of processing should come from a single third 
country. 

International engagement and assertive trade policies.  

The EU will continue strengthening its supply chain resilience and diversification, and 
thus  its  economic  security  through  international  cooperation  and,  where  necessary, 
autonomous  measures.  For  instance,  by  enhancing  openness  to  mutually  beneficial 
exchanges, EU trade agreements support the diffusion of clean and more efficient production 
methods and technologies and create market access opportunities for green goods and services. 
They help secure access to third country markets for our renewable energy industry and ensure 
undistorted trade and investment in the raw materials and energy goods that are required to 
secure the necessary supplies to support the transition to climate neutral economies.    

The EU is also partnering with the broadest possible range of  countries to ensure it has 
diversified access to the necessary inputs to develop its clean tech industry whilst supporting 
partners in their own development and local value addition under Global Gateway. This is done 
for  example,  through  sustainable  critical  raw  material  partnerships  with  resources-rich 
countries, as already done with Chile, Argentina, Kazakhstan, Namibia, Ukraine and Canada 
and Just Energy Transition Partnerships with South Africa, Senegal, Indonesia and Vietnam. 
Moreover, The Critical  Raw Materials Club proposed by President  von der Leyen will 
facilitate  international  cooperation  and  coordination  by  bringing  together  consumer  and 
resource rich countries.  

The  Commission's  Strategic  Energy  Technology  Plan  (SET  Plan)  aims  at  fostering 
collaboration between the SET Plan countries in their efforts to advance research, innovation, 
and competitiveness in new clean energy solutions.  

In addition, while remaining an open destination for global trade, the EU will also continue 
to  protect  itself,  when  necessary,  in  a  proportionate  and  targeted  way.  This  includes 
responding robustly to unfair and injurious practices in accordance with the EU’s international 
obligations and rules. The anti-subsidy ex-officio investigation into electric vehicles imported 
from China announced by the President of the European Commission in September is the most 
recent example for this.  

The  recently  adopted  European  Economic  Security  Strategy  also  sets  out,  amongst 
others, a risk assessment of critical technologies, many of which play an important role 
in  the  clean  transition9,  on  the  basis  of  which  the  EU  may  decide  on  further  measures  to 
promote such technologies, partner with third countries or protect them through autonomous 
measures. The EU has already enlarged its autonomous tools and is considering adopting new 
ones to address possible gaps where appropriate, as laid out in the Strategy. 

Despite  all  the  significant  work  to  support  clean  tech  manufacturing  and  deployment,  the 
Commission is aware that there are still a number of challenges that are actively being worked 
on , such as high energy costs, administrative complexity in accessing financing, cumulative 
regulatory burden and skills and labour shortages.  

3.   Mitigating the impact of the US Inflation Reduction Act 

9 Commission Recommendation (EU) 2023/2113 of 3 October 2023 on critical technology areas for the EU’s 
economic security for further risk assessment with Member States (europa.eu) 

7 

 
 
With the balanced, broad and cooperative approach illustrated above, the EU is building 
a solid business case for the development and use of clean technologies and has managed 
to stay among the front-runners in the field. But EU efforts do not come in isolation, as other 
global players pursue similar objectives. 

All  major economies  are seeking to improve competitiveness of their industries in this 
economic  field  of  the  future.  For  example,  the  US,  China,  Canada  and  Japan  have 
introduced public financial incentives to ramp up their investment plans in clean technologies.  

As noted in the Green Deal  Industrial Plan, a number of net-zero technologies sectors10 are 
currently  dominated  by  China,  which  has  made  subsidising  clean  tech  innovation  and 
manufacturing a priority of its Five-Year Plan. China’s pipeline of announced investments in 
clean technologies exceeds USD 280 billion. Japan’s green transformation plans aim to raise 
up  to  JPY  20  trillion  (approximately  EUR  140  billion)  through  ‘green  transition’  bonds11. 
Canada  has  dedicated  USD  60  billion  in  clean  energy  tax  credits  and  USD  20  billion  in 
sustainable infrastructure investments in its 2023 budget12. 

This Communication focuses on the impact of the US Inflation Reduction Act. Adopted in 
August 2022, the IRA relies on direct and indirect subsidies and is a cornerstone of the 
US’s drive to create a domestic ecosystem of low-carbon technologies. The IRA provides 
for  subsidies  and  tax  incentives  worth  at  least  USD  369  billion  over  ten  years  to  attract 
investment and production in the US. IRA is expected to facilitate progress toward achieving 
the  US's  Nationally  Determined  Contribution  (NDC)  to  the  Paris  Agreement  of  reducing 
greenhouse gas emissions by 50 to 52 % below 2005 levels by 2030.  

As stated in the 10 March 2023 joint statement by President von der Leyen and President 
Biden, the United States and the European Union are working together to address the 
climate  crisis,  accelerate  the  global  clean  energy  economy,  and  build  resilient,  secure,  and 
diversified clean energy supply chains - objectives that are at the heart of the US IRA and the 
EU Green Deal Industrial Plan. To this extent, the US IRA reflects a welcome, positive turn in 
US climate policy. 

Nonetheless, some elements of the IRA, notably with respect to discriminatory content 
and  assembly  requirements,  have  raised  concerns  amongst  international  partners, 
including the EU, regarding distortion of international trade and investments, adverse impacts 
of  companies  not-located  in  the  US  and  its  compatibility  with  World  Trade  Organisation 
(WTO) rules. More generally, the sheer and uncapped amount of IRA incentives has raised 
questions about its potential to undermine EU efforts to develop an internationally competitive 
clean tech sector by means  other than production subsidies, and  to  divert  future investment 
decisions.   

10 The 2023 Competitiveness Progress Report 2023 PROGRESS REPORT ON COMPETITIVENESS OF 
CLEAN ENERGY TECHNOLOGIES provides an overview of EU competitiveness in the main clean 
technologies. 
11 European Commission, A Green Deal Industrial Plan for the Net-Zero Age, 
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_510  
12 Government of Canada, A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future, 
https://www.budget.canada.ca/2023/home-accueil-en.html.  

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The EU and the US have put in place mechanisms to discuss such EU concerns and to 
address broader global ramifications. Notably, the US-EU Task Force on the IRA set up 
in October 2022 has led to useful clarifications in the implementation guidance issued by the 
US Treasury on 30 December 2022. This now confirms that that EU companies can benefit 
from the Commercial Clean Vehicle Credit scheme (covering leased vehicles) under the IRA, 
although certain concerns remain with regards to the market for private cars.  

Following the March 2023 joint statement, the EU and the US started negotiations on a 
targeted EU-US Critical Minerals Agreement (CMA) to ensure that the EU is granted the 
equivalent  status  of  an  FTA  partner  under  the  provisions  of  the  IRA  (setting  out  the 
requirements  for  the  origin  of  critical  minerals  used  in  electric  vehicle  batteries  that  could 
benefit from IRA incentives).  

We look forward to concluding the CMA negotiations with the US. Such an agreement will 
strengthen the EU-US political and trade relations in geopolitically challenging times, in which 
resilient supply chains and secure access to critical raw materials are of increasing importance.  
The CMA could help by enabling companies mining or processing critical minerals in the EU 
find new business opportunities in the US. This should help strengthen EU-US supply chains, 
and  help  in  promoting  high  levels  of  sustainability  and  labour  rights  along  global  critical 
minerals’ value chains. 

The EU-US Clean Energy Incentives Dialogue was also launched in March 2023. Thanks to 
this  dialogue  both  sides  have  started  a  constructive  engagement  on  how  to  build  net-zero 
industries of the future and how to address challenges such as non-market economy practices. 
As part of the EU-US Trade and Technology Council (TTC), this dialogue will ensure that 
respective EU and US incentive programs are mutually reinforcing. Other relevant initiatives 
in the context of the TTC are the agreement on a common international standard on megawatt 
charging  systems  for  the  recharging  of  electric  heavy-duty  vehicles  and  the  Transatlantic 
Initiative  on  Sustainable  Trade  that  will  contribute  to  a  more  integrated  and  efficient 
transatlantic  marketplace  for  green  goods,  including  through  working  on  conformity 
assessment. 

These initiatives will help mitigating some of the most problematic and discriminatory 
elements of the IRA. Nevertheless some important structural challenges due to the significant 
amount of US subsidies will likely continue to affect the global landscape in clean technology 
development. 

4.  Assessment of the situation  

Impact of the US Inflation Reduction Act to date 

While the US IRA will likely have an impact on certain investment decisions in the specific 
sectors it addresses, its macroeconomic effect on Europe has so far been limited, not least 
because investments it could bring about have not yet fully materialised. The long-term impact 
is hard to assess at this stage, with different studies finding contrasting results.13   

13 A report by Franco-German Council of Economic Experts (September 2023) found that the macroeconomic 
impact of the IRA on European countries over a 5- to10-year horizon will be extremely limited, while noting 
that other studies using the same model (Attinasi, M G, L Boeckelmann and B Meunier (2023b), obtain 
estimates of the effect of IRA that are significantly larger. 

9 

 
 
 
 
 
 
 
The promise of easily accessible tax credits and the fact that it provides support to cover 
operating costs for producing clean technologies makes IRA an attractive programme for 
industry.  It  is  estimated  that  the  IRA  contributed  materially  to  reducing  energy  and 
manufacturing  costs1415.  This,  combined  with  structurally  cheaper  energy  prices  in  the  US 
compared to Europe, is likely to make the US a more attractive place to invest than before. The 
IRA and its effects on EU investments are thus a factor that the EU needs to constantly monitor.  

Analyses so far point towards a rapid acceleration of clean tech investments in the US. 
However, for the time being it is difficult to assess the IRA real impact on the EU economy, 
and particularly on the development of the EU’s clean technology industrial base in the longer 
term. This is due to several factors.  

First  and  foremost,  investments  need  time  to  materialise  into  tangible  projects  whose 
effects cannot yet be seen today. The IRA has been in place for a relatively short period of 
time, it was signed into law only in August 2022. There is currently no reliable data available 
on investments realised. In addition, IRA tax credits have not yet been provided, in light of the 
fact that these credits can only be claimed after the end of fiscal year 2023 (with the 2023 tax 
returns filed in mid-2024). The actual uptake for a given fiscal year of IRA tax credits will not 
be known until 18 months after the start of that fiscal year.  

Secondly,  many  IRA  tax  credits  are  not  capped  in  overall  volume  or  value  terms, 
therefore the total amount of subsidies will depend on actual take-up. As a consequence, 
estimates of what could ultimately be its total allocation range widely from USD 390 to 900 
billion (approximately from EUR 370 billion to EUR 852 billion) for the period from 2023 to 
2031.  The  uncapped  nature  of  the  IRA  tax  credits  therefore  adds  uncertainty  on  its  future 
economic effects, both in the US and the EU.  

Thirdly, the EU investment climate is affected by several major developments, beyond 
the IRA. First of all, Russia’s war of aggression against Ukraine triggered unprecedented high 
volatility  of  energy  prices.  In  addition,  the  EU  economy  faces  still  high  but  decreasing 
inflationary  pressures  and  high  interest  rates  .  Finally,  other  major  global  players  have 
introduced distortive subsidies and engaged in unfair trade practices in pursuit of their climate 
and clean tech ambitions. All these factors negatively affect investment decisions in Europe, 
which makes it very difficult to assess IRA’s relative impact on the EU economy. 

General trends in some technologies sectors 

Throughout several relevant industrial sectors, the support from IRA provides some cost 
competitive  advantages  for  US-based  businesses  vis-à-vis  international  competitors. 
There are indications that US investments are expanding in the areas of battery, solar and wind 
technology  manufacturing.  In  total,  the  IRA  has  so  far  led  to  over  $110  billion  of  capital 

14 BCG (2022), “US Inflation Reduction Act: Climate & Energy Features and Potential Implications”, p4. 
15 Deloitte (2023), “Sustainability & Climate IRA and the net-zero race – How EU industrial policy should 
respond”, p11. 
16 FACT SHEET: One Year In, President Biden’s Inflation Reduction Act is Driving Historic Climate Action 
and Investing in America to Create Good Paying Jobs and Reduce Costs | The White House 

10 

 
 
 
 
 
 
 
 
investments  announced  for  clean  energy  manufacturing  projects,  including  over  $70  billion 
towards electric vehicles and battery supply chains16.  

The  cost  advantage  for  the  production  of  battery  packs  as  a  result  of  the  IRA  tax  credits 
amounts to approximately 25 to 30% of the total production costs. The Commission estimates 
that the IRA is contributing to a significant cost reduction in the production of green steel. As 
a result of the IRA, the production cost of green hydrogen is estimated to reach USD 0.3/kg 
by 2025 and is expected to further decrease by 2030.17 Such lower input costs due to the IRA 
have  therefore  the  potential  to  accelerate  the  deployment  and  long-term  investment 
perspectives of clean technologies in the US.  

The IRA facilitates the prediction of hydrogen pricing. However, the US has so far not yet 
published the specific standards to qualify as clean hydrogen, which currently holds back final 
investment decisions in the US.  

The solar industry stressed that investments have been falling in the EU, mostly as a result 
of  the  strong  pressure  from  Chinese  solar  manufacturers.  The  IRA  presents  an  additional 
challenge for European solar manufacturers. Nevertheless, according to the European Solar PV 
Industrial Alliance, progress towards achieving the objectives set out in the Net-Zero Industry 
Act may lead to future expansion plans in the EU.  

The IRA is expected to have some positive effects for the US market of electric vehicles, 
but  it  is  not  expected  to  adversely  affect  demand  in  Europe.  However,  whether  or 
notEuropean companies will reap the benefits of IRA remains unclear. The IRA has triggered 
over USD 50 billion investments  in  the battery sector, but  European investments in  the US 
have so far been dwarfed by investments of domestic US and Asian origin. The US demand 
for batteries and critical minerals might benefit these sectors in Europe18 but this should not be 
taken for granted. The long-term impact of the IRA on the battery value chain is still difficult 
to anticipate as some investment decisions in the EU have been put on hold. 

EU investment environment 

The Commission is closely monitoring global investment flows in clean tech sectors. While 
a number of European companies have announced their intention to reconsider their investment 
plans,  there  is  so  far  insufficient  evidence  to  assess  the  extent  of  the  IRA’s  impact  on 
investments in the EU or the extent to which it has led to EU firms deciding to relocate to 
the US.  

Despite the many headwinds mentioned above, the EU continues to play an active role in 
expanding the global clean technology market with important business opportunities for 
investors  and  industry.  One  reason  for  this  is  the  proximity  principle:  while  many  clean 
technologies, or key inputs for them, are internationally traded, production of goods tends to 
congregate close to demand and the EU has a long track record in creating predictable demand 
for clean technologies through the tools and measured summarised above. The EU can also 
build  on  a  strong  science  base  and  talent  pool  to  further  promote  innovation,  identify  and 
develop  breakthrough  technologies  and  support  their  commercialisation.  Therefore,  a  sharp 

16 FACT SHEET: One Year In, President Biden’s Inflation Reduction Act is Driving Historic Climate Action 
and Investing in America to Create Good Paying Jobs and Reduce Costs | The White House 
17 BCG (2022), “US Inflation Reduction Act: Climate & Energy Features and Potential Implications”, p15 

11 

 
 
 
 
 
 
 
build-up  in  US  manufacturing  investments  to  serve  newly  created  demand  there  does  not 
necessarily entail a diversion of investments that would serve European demand from within 
the EU – and may represent a new growth opportunity for EU firms with relevant technology 
and experience.19  

Companies in the EU also benefit from the funding possibilities permitted under State 
aid rules, as evidenced by the amount of authorised aid mentioned above. In addition, in order 
to tackle the risk that specific investments could be diverted away from the EU due to greater 
support  received  elsewhere,  the  Commission  has  provided  (via  the  Temporary  Crisis  and 
Transition  Framework)  a  specific  tool  for  Member  States  to  take  such  diversion  risks  into 
account, by allowing support up the level of the foreign subsidy but not exceeding a proven 
funding  gap  (so  called  ‘matching  aid’).  This  tool  has  been  carefully  calibrated  in  order  to 
preserve the level playing field within the single market. 

Important expansion plans and investments are occurring in the EU to roll out key clean 
technologies. Indeed, the Commission awarded on 13 July 2023 over EUR 3.6 billion to 41 
large-scale clean tech projects to be financed through the EU Innovation Fund. Additionally, 
under  InvestEU,  around  EUR  4.5  billion  of  loans  in  clean  energy  transition  have  been 
approved.  Through  clean  tech  partnerships20  with  industry  and  the  European  Innovation 
Council,  Horizon  Europe  is  currently  investing  more  than  EUR  11  bn  into  net  zero  world-
leading clean technologies. These investments will help to crowd in additional private funding 
that is needed to roll out clean technologies at sufficient scale. 

Looking more specifically into sectors, the Commission  is  co-investing EUR 2 billion with 
industry in the Clean Hydrogen Partnership and has approved two IPCEIs with public and 
private investments for a total of EUR 26.4 billion across the EU. During 2022 and 2023, 17 
electrolysers companies have announced major manufacturing projects in Europe. Looking at 
the heat pump value chain, the total investment announced over the last 5 months to build new 
production capacity in Europe to be executed over the next 3 years sums up to nearly EUR 5 
billion.  

Announcements of new investment decisions in the EU are promising and if implemented 
will  enable  Europe  to  meet  its  clean  production  targets  by  2030  to  a  large  extent. 
According to  the  IEA’s  latest  report “World Energy  Investment  2023”,  the EU remains the 
second largest global investor in clean tech in the period 2019-2023 behind China and ahead 
of the US.21 (see Figure 1). 

19 As an illustration, the European Innovation Council has supported a hydrogen company which has achieved 
'Unicorn’ valuation, and more recently another one which is now valued at over €200m completing a €40m 
fundraising round earlier this year. 
20 Including initiatives and projects run by the Knowledge Innovation Communities (EITInnoEnergy, Climate 
KIC, EIT Raw materials) funded by the European Institute of Innovation and Technology. 
21 International Environmental Agency (2023), “World Energy Investment 2023”, p14 

12 

 
 
 
 
 
 
 
Figure 1: Increase in annual clean energy investment in selected countries and regions, 2019-
2023e (source IEA) 

Finally, the overall impact of the IRA on the EU clean technology investments will also 
depend on the effectiveness of the EU response and on the EU policies to improve its long-
term competitiveness and technological edge. It is crucial that the EU maintains its efforts to 
stay competitive and keeps on supporting Member States and market players in their effort to 
decarbonise  their  economy.  The  potential  risk  of  global  competition  can  be  mitigated  by 
stepping  up  the  EU’s  own  attractiveness  in  the  European  and  global  context,  including  by 
tackling  remaining  challenges  such  as  energy  costs,  the  attractiveness  of  the  business 
environment,  the  availability  of  sufficient  skilled  labour  and  private  capital,  reducing 
legislative complexity and the administrative burden and accelerating permitting procedures. 
Moreover, a swift adoption of relevant EU legislation, such as the Net-Zero Industry Act and 
STEP, reinforced by the MFF mid-term revision, would help further improve the EU regulatory 
framework and address the heightened need for EU public investments in critical technologies. 

5.  Conclusions  

The  EU  has  been  leading  the  green  transition  both  domestically  and  globally.  The 
European  Green  Deal  is  an  ambitious  plan  to  transform  the  EU  into  a  modern,  resource-
efficient, and competitive economy. The EU’s growth model is based on a smart policy mix 
building  on  a  growth  enhancing,  predictable  and  simplified  regulatory  and  business 
environment, faster access to funding, enhancing skills and open trade. The European Single 
Market  based  on  open,  competitive  markets,  and  a  supportive  social  model,  diversity  and 
creativity ensures predictability for investors.  

The Net-Zero Industry Act, the Critical Raw Materials Act and the Strategic Technologies for 
Europe Platform  (STEP)  will support our growth  model in  clean tech.  Horizontal measures 
such  as  the  economic  governance  review  are  also  necessary  to  underpin  investment  and 
competitiveness. The Commission calls on the co-legislators to swiftly finalize negotiations on 
these proposals, as well as for the conclusion by the end of 2023 of the mid-term review of the 
MFF.   

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Others  are  also  adopting  ambitious  measures  to  support  the  transition  to  climate  neutrality, 
including  through  industrial  policy  measures.  China,  for  instance,  currently  dominates  a 
number of net-zero technologies sectors and some of its public support policies poses the most 
direct risk to the competitiveness of European clean tech companies. 

This Communication focuses on the case of the US, who with the Inflation Reduction Act 
have  changed  their  approach  to  climate  change.  The  IRA  supports  the  reduction  of 
greenhouse gas emissions and the transition to cleaner energy sources and contributes to global 
efforts to implement the Paris Agreement. It is, to this extent, a welcome development.  

However, with IRA being based on direct and indirect subsidies in a drive to create a domestic 
manufacturing ecosystem of low-carbon technologies, it is also clear that the US’s approach to 
support the green transition is different to that of the EU, with its pragmatic mix of market, 
funding and regulatory tools on both the demand and the supply side.  

Apart from specific problems with certain discriminatory provisions which the EU is currently 
addressing through dialogue, an approach based so predominantly on uncapped manufacturing 
subsidies  must  be  continuously  monitored  by  the  Commission  to  detect  any  distortionary 
effects between our continental investment markets. At the same time, some lessons can be 
drawn in relation to the simplicity and swiftness of the IRA approach. 

Despite these differences, both models offer the opportunity to boost clean tech markets 
and create demand for green products and services, making our paths towards a sustainable 
net zero economy and society by 2050 a reality. The European Green Deal and the US IRA 
will accelerate the deployment of clean tech in the EU and the US respectively, contributing to 
the  needed  global  investments  in  clean  tech.  Demand  for  clean  tech  products  worldwide  is 
rising.  

However,  there  would  be  no  EU  green  transformation  without  a  strong,  competitive, 
sustainable EU industry and fair and open trade.  

While  IRA  may  lead  EU  companies  to  consider  relocation  to  the  US,  preliminary  and 
available data are so far not conclusive. It is therefore too early to be able to assess the extent 
of the impact of the IRA on investments in the EU and on such possible relocation decisions. 
The concrete effects of the IRA on EU investment can only be assessed in the longer term due 
to  the  long-term  investment  cycles  and  long-lasting  capital  assets  of  the  clean  technology 
industry.  

In this light, the Commission will remain highly vigilant. We will continue monitoring global 
and domestic investment flows and public support policies from other countries, while at the 
same time constructively engaging with the US to mitigate potential effects of the IRA and 
make  sure  that  our  respective  policies  are  mutually  reinforcing  in  accelerating  the  green 
transition.  

Beyond IRA, other elements will shape the future competitiveness of the EU clean tech 
industry. This in particular concerns the stable supply of affordable energy, the availability of 
a highly skilled work force and adequate private and public funding, the sufficient availability 
of  raw  materials,  continued  trade  openness,  as  well  as  a  supportive  business  environment. 
Sustained,  determined  and  consistent  policy  action  on  all  of  these  fronts  will  therefore  be 
essential. 

14