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Germany, France Make Joint Push for Access to US Climate Support
(Bloomberg) -- Germany and France urged Joe Biden’s administration to grant Europe the same exceptions enjoyed by nations with free-trade deals with the US in a bid to resolve a transatlantic spat over green subsidies.
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In a joint paper addressing the US climate package known as the Inflation Reduction Act, the governments in Berlin and Paris proposed a “green economic partnership” between Europe and the US. It would also include waiving local-content rules so that European products are eligible for tax credits in the same way as American ones, and regular information sharing on the scale of government aid for “transformation technologies.”
“It is in our mutual interest to swiftly find common ground here and to avoid disruptions to the level playing field between close partners at a time of trustful cooperation to face the Russian war against Ukraine,” according to the paper published Monday. It was signed by German Economy Minister Robert Habeck and his French counterpart, Bruno Le Maire.
“President Biden‘s recent statements offering a perspective to make the IRA compatible with the European interests is a welcome first step,” the ministers said.
The publication of a unified Franco-German position on the US subsidy package comes as something of a surprise given contrasting signals from Berlin and Paris in recent weeks.
Although Biden said this month he saw room for tweaks to “make it easier for European countries to participate” it still isn’t clear how the law might be revised or if that would even be possible. Republicans are unlikely to be willing to amend it after they take control of the House next year.
French President Emmanuel Macron has adopted a more aggressive tone, urging European Union allies to come up with a robust answer that includes common funding. He has called for a so-called Buy European Act, which would reserve public tender offers and subsidies for manufacturers on the continent.
German Chancellor Olaf Scholz has been less combative, pushing back against the idea of joint funding options. His administration wants the EU to respond by streamlining how existing funds are distributed and increasing incentives at the national level, people familiar with the country’s position have said.
Speaking at a panel discussion in Berlin Monday, one of Habeck’s deputies, Franziska Brantner, said that talks with the US on resolving the differences “are in full swing.” At the same time, Germany needs “do its homework fast” and make sure “the money we already have gets to where it’s needed faster,” she added.
The EU, which negotiates external trade deals on behalf of member states, has said it may take the US to the World Trade Organization over the climate law.
The Franco-German paper published Monday also calls on the European Commission to expand its own green agenda, for example by making state-aid rules, subsidies and tax-credits more flexible.
Should that prove insufficient, EU trade-policy instruments should be deployed “to preserve the single market from distortions,” according to the document.
There are signs that the US legislation is already sucking investment away from Europe. Spain’s largest utility Iberdrola SA said last month that nearly two-thirds of the €47 billion ($50 billion) it plans to invest in its power networks over the next three years will be funneled to the US.
Sweden’s Northvolt said this month it’s considering postponing plans to build a battery factory in Germany and expanding first in North America, where the government is wooing battery manufacturers with billions of dollars in incentives.
While Habeck and Le Maire acknowledged that the US is right to “advance ambitiously on the green transformation agenda,” they also noted that Biden’s approached has “raised a lot of concerns for our European industry as well as other allies of the USA.”
“We can benefit from each other’s strengths and jointly contribute to a new era of green manufacturing on both sides of the Atlantic,” they added.
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