On Friday, 31 March, the U.S. Department of the Treasury has released guidelines for qualifying for electric vehicle grants under the framework of the U.S. Inflation Reduction Act (IRA). The EU has been looking forward to these announcements since they clarify the extent to which European producers of critical minerals and batteries will have access to IRA support.
The Treasury has confirmed that countries with “newly negotiated critical minerals agreements” will be able to qualify as trading partners, thereby enabling them to meet specific IRA criteria. This should reassure the EU, which on 10 March, agreed with Washington to negotiate a deal on critical raw materials (see EUROPE 13139/3).
Electric vehicles whose batteries are made with a particular (evolving) percentage of critical minerals mined or processed in North America or a partner country will be eligible for a tax credit of $3,750.
However, in order for electric vehicle buyers to access the maximum $7,500 tax credit, the remaining battery components must be produced or assembled in North America. This means that batteries manufactured entirely in the EU will only be eligible for half of the credits.
The U.S. memo released on 31 March also clarifies that the tax credits are limited to light vehicles costing less than $55,000 at the time of purchase and to van, pick-up, or sport utility vehicles costing less than $80,000.
In December 2022, the US Department of the Treasury had already issued a guidance note easing access to the IRA for commercial electric vehicles in the EU (see EUROPE 13091/11), but had not yet specified the conditions for private vehicles.
Read the U.S. memo: https://aeur.eu/f/661
Positive but cautious reception from the EU
The European Commission has said it had taken note of the U.S. announcement, which it would analyse. However, at first glance, it seems to them that the announcement “confirms the pragmatic solutions we have been discussing in the context of the EU-US Inflation Reduction Act Task Force”.
EU Trade Commissioner Valdis Dombrovskis will be in Washington from 11 to 14 April, where he will be able to reiterate the EU’s demands for the agreement that is being negotiated on critical minerals.
The European Commission also noted that more broadly, it is building on the new Clean Energy Incentives Dialogue with the US to “ensure the most efficient use of our incentives”. Vice-President of the European Commission, Margrethe Vestager, has been in Washington in recent days to work on this issue. (Original version in French by Léa Marchal)