Header: Subsidy War Between US and Europe Intensifies in Race for Energy Transition
Paragraph 1: The United States and Europe are engaged in a fierce competition for the energy transition, with journalists dubbing it a “subsidy war.” While those involved in the race aim to maintain an image of cooperation and agreement, the rivalry is undeniable.
Paragraph 2: Last summer, the US Congress passed the Inflation Reduction Act (IRA), providing generous financial support to companies in sustainable sectors. This move was celebrated by many businesses in the US. However, European business leaders became concerned about the increased competitiveness of US goods due to the IRA, as well as their own soaring energy costs.
Paragraph 3: In response to these concerns, the EU passed the Net Zero Industry Act earlier this year. The act aimed to enhance the competitiveness and resilience of the EU’s net-zero technology industrial base. However, businesses were not satisfied with the act, criticizing it for being needlessly complicated and lacking specific elements.
Paragraph 4: Meanwhile, in the US, the initial price tag of the IRA was estimated to be below $400 billion over ten years. However, recent estimates suggest that the actual cost of the IRA could exceed $1 trillion. Critics warn that funding the IRA may lead to inflation and economic instability.
Paragraph 5: The EU has allocated half a trillion euros for its own subsidy efforts through the European Green Deal and the InvestEU program. However, internal subsidy plans within member states have caused tensions, with wealthier countries accused of unfair competition by poorer nations.
Paragraph 6: Germany’s economy minister, Robert Habeck, recently referred to the IRA as a declaration of war, highlighting the US’s desire to dominate industries such as semiconductors, solar, and hydrogen. Unless the EU simplifies its subsidy distribution procedure, there could be a business exodus from Europe to the US.
Paragraph 7: Europe’s economic decline, which began in 2022 when the continent’s dependence on external energy suppliers became apparent, may be further exacerbated by the subsidy race. The duration and outcomes of the subsidizing efforts remain uncertain.
Paragraph 8: The intensifying subsidy war between the US and Europe highlights the urgent need for both regions to accelerate their energy transitions. As the competition heats up, businesses and governments must navigate the challenges of subsidy distribution and ensure the long-term sustainability of their respective economies.
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Original Story at oilprice.com – 2023-07-15 23:00:00
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