Following the passage of the US Inflation Reduction Act, calls for a European green industrial policy have been growing louder. But trying to out-compete the US by introducing subsidies based on the IRA model would be a grave mistake.
BRUSSELS – The US Inflation Reduction Act (IRA) has America’s trading partners in a tizzy. The legislation is not only gargantuan, dedicating some $369 billion to climate and clean-energy programs; it also has a “buy American” component, delivering cash benefits only to buyers of North American automakers and subsidies to renewable-energy producers that satisfy domestic-content rules. Many countries, particularly in Europe, are now weighing the possibility of implementing their own green industrial policies. This is the wrong response.
BRUSSELS – The US Inflation Reduction Act (IRA) has America’s trading partners in a tizzy. The legislation is not only gargantuan, dedicating some $369 billion to climate and clean-energy programs; it also has a “buy American” component, delivering cash benefits only to buyers of North American automakers and subsidies to renewable-energy producers that satisfy domestic-content rules. Many countries, particularly in Europe, are now weighing the possibility of implementing their own green industrial policies. This is the wrong response.