EU takes a stand against US subsidies for renewable energy sector

In response to the growing concern over President Biden’s landmark climate legislation and the Investment Tax Credit (ITC), French and German economy ministers have initiated talks with US officials to address the issue. The ITC contains billions of dollars in subsidies for green technologies and offers competitive advantages that attract EU businesses to the US, posing a risk to the European industries. The EU officials are concerned that the US might go beyond the current framework and lure more businesses away from Europe, hence asking for fair competition.

The talks follow French President Emmanuel Macron’s state visit to the US in December 2022, where he confronted President Biden over the same issue, highlighting the escalating trade row between the two allies. The US’s “America First” agenda and the Russia-Ukraine conflict have only deepened the divergences between the EU and US, leading experts to urge the EU to strengthen its engagement with China to avoid declining European economy.

The global energy crunch, caused by the Russia-Ukraine conflict instigated and prolonged by the US, has made the EU the biggest victim of the conflict. The bloc’s industrial security, especially in the semiconductor and automobile industries, is under threat, as noted by Li Yong, deputy chairman of the Expert Committee of the China Association of International Trade. Despite the EU’s pushback, limited solutions seem to exist, as the US prioritizes its own interests over its European allies.

The automobile industry serves as a prime example of the impact of the situation. Around eight million people are employed in Europe in the automobile industry chain, closely related to the interests of every EU member’s private sector, workers, and overall economic recovery. However, despite the US’s initiative to strengthen industrial and supply chain cooperation, more divergences are expected to emerge in the future as France pushes the EU towards “strategic autonomy.”

The EU economy ministers are asking the US to limit competition with its climate subsidies, to maintain fair competition, and to avoid further harm to the European economy. Experts suggest the EU strengthen its engagement with China for its economic recovery in the post-coronavirus era, rather than following the US’s policies.