Germany and France warned that European businesses will need to unleash investments on a nearly unparalleled scale to keep from falling behind US and Chinese firms as countries revamp their economies to make them more climate friendly.
German Chancellor Olaf Scholz and French President Emmanuel Macron met in Paris Sunday to discuss how the European Union should respond to US President Joe Biden’s Inflation Reduction Act, which includes roughly $500b in new spending and tax breaks over a decade to benefit US companies, Bloomberg reported.
The EU argues that the law, which came into effect this year, doesn’t comply with international rules and would unfairly entice companies to shift investments to the US from Europe.
The US law will subsidize energies of the future, from hydrogen to batteries, wind and solar, and will aim to make manufacturing self-reliant and to ensure the country isn’t dependent on China or other nations.
Germany and France have urged the US to tweak the law to give European companies more flexibility to take advantage of the credits being offered. But officials in the EU have been growing skeptical that Washington will make meaningful changes and have started mapping out ways to protect European industry.
The EU’s response will likely include giving member states more latitude to invest in their own companies and would redirect existing EU money to firms in need. They’ll also discuss how far-reaching any plan will be and, importantly, if it will include new money.