France demands 'transparency' from US over climate subsidies
EU policymakers are concerned that tax benefits for US companies will disadvantage European firms and lure them to relocate to the US.
French Economy Minister Bruno Le Maire has urged for "transparency" between the United States and Europe over the contentious issue of green subsidies and tax benefits.
On Tuesday, Le Maire and his German counterpart, Robert Habeck, will visit Washington to meet with Treasury Secretary Janet Yellen and discuss a historic US spending package that has Europe on edge.
The Inflation Reduction Act (IRA) allocates $370 billion to energy transition subsidies in the United States, including tax breaks for electric vehicles and batteries manufactured in the United States.
"We must be realistic. The IRA is a game changer," Le Maire said as quoted by AFP.
"The IRA offers competitive advantages which, coupled with very low energy prices in the United States, poses a risk to our industries," Le Maire added.
The EU is pressuring the US to grant exemptions to European firms. However, a special joint task group formed to address Brussels' concerns have produced little fruit.
"The most important thing is that we cooperate with allies to have transparency about the amount of subsidies and tax credits that will be granted," said Le Maire.
The French Economy Minister went on to say, "If you know at what price green hydrogen will be released in the United States and at what price it will be released in Europe, this allows you to guarantee fair competition conditions."
"But for these alignment clauses to work, we still need to know how much the subsidies will be," Le Maire added, referring to the European Commission's proposal to align with American subsidies.
To counteract the threat to European industry, the EU revealed proposals such as the controversial relaxation of state aid rules, to level the playing field.
However, member countries cannot agree on how to tackle the issue.
In Washington, Le Maire aims to secure a "cooperative approach to the most strategic investments in sensitive areas such as semiconductors."
"It's not like there is an overproduction of batteries, an overproduction of solar panels, or an overproduction of semiconductors. On the contrary, there are not enough of them," he said.
"The challenge is not to steal very competitive markets. The challenge is that we manage to develop together, in the United States and Europe, an efficient, competitive green industry that is the most innovative on the planet," he added.
The IRA specifically covers a wide range of areas, including energy-related legislation.
It increased the Investment Tax Credit for renewable energy projects from 26% to 30% and extended it to all storage projects. It also includes tax credits to manufacture solar panels, inverters, and racking components.
In addition, there are more tax credits for electric vehicles, electrical panels, heat pumps, and many other products directly related to the renewables industry.
The bill promises to put the difference of about $300 billion toward deficit reduction. It will also provide $369 billion in funds for energy security and climate change. $64 billion will be allocated to the Affordable Care Act over the next ten years.
Greenpeace was quick to slam the project as a "climate hypocrisy", which is likely to antagonize other countries.
Wealthier countries are breaching their own climate rhetoric as they communicate to poorer nations, "do as we say, not as we do."
Read next: EU slams US over war-accumulated wealth: Politico