The Bruegel think tank published, on Monday 27 February, a paper suggesting several ways for the EU to respond to the US Inflation Reduction Act (IRA). For Bruegel, the EU should not replicate the IRA model, which does not comply with World Trade Organization (WTO) rules.
The EU should refrain from setting local content requirements (LCRs) in its funding programmes, according to the think tank. It explains that this could in particular harm the interests of European exporters, as international partners could respond with similar measures.
Along the same lines, it could attack the LCRs that exist in the IRA at the WTO. This would “send a clear political signal that the EU continues to invest in the WTO rules-based system”, say the seven authors of the paper.
Bruegel also warns against loosening State aid rules, which could fragment the Internal Market.
Instead, it recommends that the EU adopt rules that promote the internal market and transition and use public procurement to stimulate green production. “By introducing clean technology requirements in public procurement, the EU could prioritise the deployment of clean technologies produced according to European standards, without the need for a local content requirement”, the report’s authors say.
They also suggest that the focus should be on lowering electricity prices and that this should be done through renewable energy, they say. A European fund could strengthen the production capacity of renewables, in addition to existing funding. This could “guarantee a premium for 10 years for the first gigawatts produced under the scheme, and then a lower premium”. This acceleration of renewable deployment could thus reduce energy costs and further decarbonise.
See the document: https://aeur.eu/f/5im (Original version in French by Léa Marchal)