Debate: EU response to the US Inflation Reduction Act
Date: WEDNESDAY, 14 DECEMBER 2022
Speaker: Margrethe Vestager
Language: EN

Second, the US Inflation Reduction Act provides generous incentives for investing in the US, including in some ways that are discriminatory against European companies and other companies as well. The EU has encouraged the US for a very long time to increase its climate action, to do more. The Inflation Reduction Act is an important initiative to deliver on this and the Commission is fully supportive of the climate goals that the US is trying to achieve with the Inflation Reduction Act. So far for the good news. Because the Inflation Reduction Act discriminates against EU producers and exports. Many of the green subsidies come with local content, assembly, manufacturing requirements. The effect will be felt not only by EU manufacturers of key final products to enable the green transition, but also their suppliers of upstream components within the European Union, including highly specialised small and medium-sized businesses. The Inflation Reduction Act is therefore a very strong pull factor to move investment and jobs to the US at the cost of partners and allies like the EU. This is counterproductive in terms of climate and sustainability outcomes. It’s also a violation of international trade rules. But in a wider sense, it goes against the spirit of our transatlantic partnership. And we have made this clear with the Biden Administration. Executive Vice-President Dombrovskis and I discussed this in clear terms during the Trenton Technology Council meeting with our counterparts, Secretary Blinken, Secretary Raimondo and Trade Representative Tai. It is fair to say that the Inflation Reduction Act was prominent in our discussions in Maryland last week. And as a result, we heard a clear statement from Secretary Blinken committing to address EU concerns, building on the comments by President Biden given a few days later. But they also contended that any legislative changes would be difficult. So what we need to see now is that these political commitments made by the US, that they translate into concrete solutions in the implementation of the act to limit the damage as much as possible. This is the aim of the task force which has been set up between the European Commission and the White House. It will continue working hard with the aim of seeing results by the end of this year, because that is also the timing for guidance of the US Treasury to implement the Inflation Reduction Act. We already have war in Europe, the last thing we need is a trade war on top. Through the Trade and Technology Council, and in particular when you look at the work that we’ve been doing on semiconductors, well, we have shown that a collaborative transatlantic approach to industrial subsidies, that is possible. And this should be the guiding principles for these sectors, the green sectors, the clean—tech sectors that we are discussing as well. While we keep working with our US partners to avoid negative consequences for Europe of the US Inflation Reduction Act, we need to continue pushing for Europe to become a decarbonised, low—energy—price continent. And for that to happen as soon as possible. The attainment of the Green Deal’s objective for Europe to become a climate—neutral continent by 2050, that should not be put at risk. The Green Deal is the European growth strategy, and we need to accompany our industries in meeting the ambitious targets. It is therefore of fundamental importance that the European Union stays an attractive place for innovation, for investment in sectors that are strategic to the green transition. Those are not all sectors. Those are specific sectors. To facilitate this, just to face the energy crisis, as you well know, in March this year we put in place a temporary crisis framework. This enables Member States to help businesses that face extraordinary increases in energy prices, and we have been reviewing it constantly to ensure that it remains adapted to the needs of the business community. But in the current context, in the combination of huge price differences, the effects of the Inflation Reduction Act, we need to make sure that it is even simpler, even faster, even more targeted, while not losing sight of the need to preserve a level playing field to keep the single market together. And in this context, yesterday we launched a consultation of Member States in particular to seek their views on the following three issues. First, how to further simplify the granting of aid for the rollout of renewable energy. Second, how to further simplify the granting of aid to decarbonise production processes of industry. And thirdly, whether it is necessary to support certain types of productive investment in strategic sectors for the green transition. If supported by the result of the consultation of Member States, targeted adaptations of our temporary framework could serve as a bridge to real European solutions in the medium term. The whole of the EU, and not only the richest regions and Member States, should be able to preserve a strong industrial base. And that is why we need a European fund to complement existing instruments and to help ensure a fair green transition in all of Europe. Finally, public support cannot do it all. Europe urgently needs to become a decarbonised, low—energy—price continent. State aid can be a short-term solution to the current challenges, but to be competitive on the world stage, we must make further efforts to remove single market barriers – barriers that unfortunately still exist. With the RepowerEU plan we have together given a new impetus to the rollout of renewables. But more work is ahead of us to make the decarbonisation of our energy system happen fast and to bring the benefits of a high share of renewables in the energy mix to consumers in a lasting way.