Because the war on green subsidies is a risk for the US and the EU
The war on green subsidies between the European Union and the United States is accelerating, but both risk losing it. The Wall Street Journal editorial
The global war of trade and green subsidies is accelerating and last week the European Union retaliated with a series of actions against the United States.
The Green Deal Industrial Plan – that’s its name – is a direct response to last year’s Inflation Reduction Act (IRA) and, as in all trade wars, both sides will lose – writes the WSJ in its editorial.
THE ANGRY OF THE EUROPEANS
Europeans are understandably angry at the IRA’s crude protectionism. The biggest burning point is the consumer tax credit, up to $7,500, available only for North American-assembled EVs. Eligibility for half of the credit is tied to the purchase of a car with battery components manufactured in North America and the other half is dependent on using a battery with minerals mined in the U.S. or in a country that has an agreement free trade with America.
Europeans have also noted the tens of billions in subsidies the bill provides for a wide range of US industries, from carbon capture to wind energy. The fear is that this could attract such investments away from Europe.
Hence Brussels’ response to “we”. The proposed policy offers €250 billion (recovered from unspent pandemic aid) to subsidize Europe’s green industries. Brussels will also offer a pass until 2025 for EU countries that violate the usual anti-subsidy rules for green projects. This blesses the aggressive subsidy efforts of France and Germany, while the new EU fund ensures that smaller countries with smaller pockets have a chance to implement their own zero-carbon initiatives.
Don’t feel too much sympathy for the EU about US green subsidies, as before the IRA the EU was moving to impose a carbon border tax on imports. But instead of fighting this tax for the sake of producers and consumers on both sides of the Atlantic, the Biden administration has escalated the green trade war with the IRA.
What a political mess this is becoming, as well as a new threat to global growth. The United States has long disputed the trade and investment-distorting consequences of European industrial subsidies, and Europeans have agreed. This is why the EU has long since introduced anti-subsidy rules that Brussels is now abandoning.
BIDEN’S INDUSTRIAL POLICY
But the Biden administration has pursued US industrial policy with a fervor Donald Trump never imagined. This risks returning the world to the bad times of nationalist manufacturing, less competition and higher costs for consumers. Green energy subsidies and border taxes will lead to misallocation of investment which will result in higher costs and slower growth. Subsidized companies like GM and other EV makers will become political hostages in the green trade wars.
All of this is happening even after the pandemic has taught an inflationary lesson about the danger of disrupting global trade and supply chains, and as rapidly escalating prices highlight the need for cheap, abundant energy in the West. The forced green transition to nowhere is emerging as the biggest economic and strategic blunder since the credit craze of the 2000s. Consumers will pay and pay again.
(Excerpt from the press release of eprcommunication)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/guerra-sussidi-verdi-stati-uniti-unione-europea/ on Sat, 11 Feb 2023 06:01:45 +0000.