Is the US Inflation Reduction Act (IRA) (see EUROPE 13012/16, 13077/10) gradually opening up? While the European Commission welcomes “access to the US subsidy scheme for commercial vehicles” and European battery manufacturers, it deplores the tax credits granted for the purchase of a non-polluting private vehicle produced or assembled in North America.
Flexibility for commercial vehicles
On Thursday 29 December, the US Treasury Department presented guidance notices on the IRA, providing for flexibility in the interpretation of certain provisions. The Biden administration has also announced an additional 3 months to clarify the conditions for the tax credits provided for in the law.
More specifically, the US has finally planned to open up aid to producers of batteries for electric cars. This will include parts containing critical minerals manufactured or assembled in a country with which they have a free trade agreement. Although the EU does not have a formal free trade agreement with the US, the US authorities note that this provision would be interpreted flexibly, thus opening the way for aid to European manufacturers.
In addition, cars purchased for commercial purposes will also be eligible for tax credits under less restrictive conditions than those for private cars.
For the Commission, this is a “win-win for both sides, as it strengthens EU-US cooperation in [their] shared goal of fighting climate change and bolsters transatlantic supply chains”.
The battle continues over private cars
On the other hand, there is still a problem with direct consumer support. The IRA provides up to $7,500 in grants for the purchase of a private electric vehicle. While the conditions for granting the scheme will only be specified by March 2023 (thus delaying its implementation), as it stands, the law provides that only vehicles assembled or manufactured in North America can benefit.
The Commission denounced a “discriminatory” system, which “violates international trade law and unfairly disadvantages EU companies on the US market, reduces the choices available to US consumers and ultimately reduces the climate effectiveness of this green subsidy”. Once again, the institution has requested that the EU be exempted, like Mexico or Canada (see EUROPE 13054/2).
While discussions between the EU and the US continue in the framework of the IRA Task Force (see EUROPE 13051/26), EU Heads of Government will meet on 9-10 February for an extraordinary summit on the European response to the US law (see EUROPE 13085/2).
Read the white paper on support for battery manufacturers: https://aeur.eu/f/4si
And the notice on clean commercial vehicles from the US: https://aeur.eu/f/4sj (Original version in French by Hélène Seynaeve)