March 2. 2024. 1:31

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‘We like the IRA’: European firms eye simplicity of US green subsidies

Billions of dollars in clean energy incentives are poised to speed investment on American soil while putting the European Union’s energy transition at risk by luring away money and talent, executives said this week at a US energy conference.

US President Joe Biden’s landmark Inflation Reduction Act climate package was signed into law last year and has caused trade tensions between Washington and allies competing for cash and skilled labour to advance a shift from fossil fuels and combat climate change.

On Wednesday, US Energy Secretary Jennifer Granholm said the Biden administration makes no apologies for the IRA, and challenged EU allies to follow the US lead by providing more subsidies of their own.

“We don’t want to stoke trade wars or anything like that,” said Granholm. “We keep saying ‘have at it – you should do the same thing’ – a little friendly competition is all.”

“But we are serious about bringing supply chains back into this country,” she said at the CERAWeek energy conference in Houston, Texas.

She called the US incentives “10 years of IRA carrots you can take to the bank” and said more than 100 companies in the electric vehicle supply chain had announced investments in the United States since the law passed.

EU’s green industrial plan vague on clean tech, finance, critics say

The Commission’s ‘Green Deal Industrial Plan’, unveiled on Wednesday (1 February), promises simplified EU regulation for clean technologies, but critics say it lacks clarity and opens the door to unrestricted subsidies in France and Germany until the end of 2025.

“We like the IRA”

European energy companies echoed the call for Europe to come up with its own new incentives.

“It would be great to see the European Union policy move from stick to carrot,” said Josu Jon Imaz, chief executive officer of Spanish energy provider Repsol SA. “We don’t need banning technologies, we don’t need restrictions, we need to be attractive.”

Repsol this year expects to spend almost 40% of its project budget in the United States, including $1.5 billion in oil and gas and $1 billion in renewables, compared with 25% going into the Iberian peninsula, Imaz told Reuters.

“Simplicity is from my point of view one of the main features of the IRA and that is very important for investors… you have a broad possibility to invest in many areas in the United States,” he said.

Patrick Pouyanné, CEO of French energy giant TotalEnergies told the conference the IRA was an “invitation to accelerate green infrastructure.”

“Fundamentally, you see it as an opportunity when you put incentives. In Europe, you begin to regulate,” he said, adding that Europe and the United States should consider forming a free trade agreement on renewable energy infrastructure.

“We like the IRA,” said Sanjiv Lamba, CEO of hydrogen producer Linde Plc. It is simpler and easier to understand than the EU’s lengthy policy statements, he said.

LEAK: Commission details subsidy-matching scheme for green industry

Just days after the Commission presented its new Green Deal Industrial Plan to counter foreign subsidies for clean industry, a leaked communication details the full extent of the temporary bending of state aid rules across the bloc, including a rule to prevent a German go-alone.

Investment magnet

Takajiro Ishikawa, chief executive of Mitsubishi Heavy Industries Americas, also said the IRA is an investment magnet.

“All of the capital from advanced countries and even developing countries is flooding to America to take part of the investment that stems from the IRA,” Ishikawa said

He cited a direct pay component of the Act, which allows foreign entities to benefit directly from its incentives.

“You have Uncle Sam paying you for that tax incentive… it’s earth-shattering,” said Ishikawa, whose firm is involved in hydrogen development and carbon capture and sequestration.

Ken Gilmartin, CEO of British engineering firm Wood Plc, said the IRA would put the United States in first place in the decarbonisation race.

“That is not a sentence I thought would say five years ago,” he said, noting that former President Donald Trump had withdrawn the US from global efforts to fight climate change.

US executives offered more tempered enthusiasm for the incentives, saying permitting obstacles can add years to development of pipelines or carbon sequestration sites.

White House energy adviser John Podesta said during the week that the Biden administration was working to reduce complexity and timelines for permitting and hoped the US Congress could pass comprehensive reform of the process.

French minister: EU must do away with ‘industrial and ecological naivety’

As the EU sets up its response to the US Inflation Reduction Act (IRA), French industry minister Roland Lescure told EURACTIV that Europe is on the cusp of a “new green industrial revolution” – if only governments are ready to spend the necessary cash.