France, Germany eye boost to European green industry in response to U.S. inflation act

The European response to the U.S. Inflation Reduction Act should involve boosting efforts to develop an ambitious green industrial policy agenda, according to a joint German-French proposal provided to Reuters by the German economy ministry. "Our common ambition is clear: to have the EU gain undisputable leadership on green industry.

France and Germany are hoping Europe boosts efforts to develop an ambitious green industrial policy as part of its response to the U.S. Inflation Reduction Act (IRA), to allow Europe to have an economic competitive edge against the United States.

The European Union fears that the United States' $430 billion Inflation Reduction Act - a massive, new green energy subsidy package - will put their companies at an unfair disadvantage. EU countries are worried their companies will suffer because of U.S. tax breaks for components used in renewable energy technologies like electric cars on condition they are made in North America.

French Finance and Economy Minister Bruno Le Maire and German Economy Minister Robert Habeck are planning a trip to the United States in January to defend European interests. The European response to the U.S. Inflation Reduction Act should involve boosting efforts to develop an ambitious green industrial policy agenda, according to a joint German-French proposal provided to Reuters by the German economy ministry.

"Our common ambition is clear: to have the EU gain undisputable leadership on green industry. It is an economic as well as a political stake for European countries. Our proposals with Minister Habeck are a robust, concrete and ambitious toolkit to make the EU the leading continent for green industries," Le Maire said. The paper proposed four objectives to support such a policy, including retaining a strong industrial base and diversifying Europe's access to green technologies and resources.

Earlier this month, U.S. President Joe Biden said new laws that give incentives for domestic production of computer chips and renewable energy parts were never intended to exclude European allies and could be tweaked. Biden did not detail what adjustments could be made and legislative options may be slim.

France is also pressing the White House to use executive powers to loosen some of the incentives in the Inflation Reduction Act, a French government source told Reuters. The climate bill that favors domestic production could possibly restrict trade, European countries say. "We will make sure that the European industry has access to affordable, safe and sustainable electricity so that they can remain globally competitive," added Le Maire and Habeck in a joint statement.