The EU needs to confront “distortions” caused by a $430 billion US plan to incentivize climate-friendly technologies, according to the bloc’s chief. Some EU members have criticized the US Inflation Reduction Act (IRA), raising concerns about the possibility of a trade war.

There are fears that tax breaks will entice EU businesses to leave, putting European firms at a disadvantage. Ursula von der Leyen, President of the European Commission, stated that the EU should “adjust our own rules.”

“Competition is good … but this competition must respect a level playing field,” she said during a speech in Belgium.

The IRA will provide incentives to American consumers to buy new and used electric vehicles, heat their homes with heat pumps, and even cook their food with electric induction.

According to US President Joe Biden, it is the most “aggressive action” his country has taken to address the climate crisis.

However, European allies see it as anti-competitive and a threat to European jobs, particularly in the energy and automotive sectors.

Von der Leyen stated that the EU needed to collaborate with the US “to address some of the most concerning aspects of the law.”

She went on to say that the EU must “adjust” its own rules on state aid in order to encourage public investment in the environmental transition.

The new legislation was discussed during French President Emmanuel Macron’s visit to Washington this week to meet with Vice President Joe Biden.

The US president suggested that “tweaks” could be made to make it easier for European firms to benefit from the subsidy package.

“I never intended to exclude folks who were cooperating with us. That was not the intention,” Biden said. “We’re back in business, Europe is back in business. And we are going to continue to create manufacturing jobs in America, but not at the expense of Europe.”

Macron told the BBC’s US partner CBS News on Sunday that the problem was “fixable,” and that his conversation with Mr Biden was “frank and fruitful.”

He stated that undermining Europe’s industry was “not in the interests of the US administration or even the US society.”

(Adapted from BBC.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability