A year ago, President Joe Biden signed the Inflation Reduction Act, causing European politicians and industrialists to fear that American tax breaks and “green” subsidies would involve investment and production in the United States. Despite these concerns, there was no large outflow of capital and transfer of production from Europe.
Banker and investor Denis Gorbunenko shared this opinion on his Facebook blog.
Joe Biden’s act provides $369 billion over the next 10 years to promote green technology, but only in factories located in North America. This law received a negative reaction in European countries, which were concerned about the potential infringement of the rights of European producers. In response, the European Commission decided to relax the rules on subsidies. Thus, Europe wanted to prevent the exodus of green technology companies to the US and enable the EU to compete in the global market.
According to Denis Gorbunenko, the fact that the EU did not stand still and implemented environmental programs, in particular the Green Deal, avoided the negative consequences of the adoption by the US of its protectionist law.
“This [Green Deal] plan aims to create a climate-neutral economy by 2050 and includes several stimulus measures for its industry. Thus, the EU itself is already able to withstand the impact of external competition due to benefits and subsidies,” the financier notes.
Denis Gorbunenko writes that the situation is different depending on the industry. “For example, in the field of solar and wind energy, European companies are actively investing in the US, but this does not diminish their interest in their home region,” he says. “They are simply expanding their geographic horizons rather than moving production.”
Also, Europe continues to be ahead of the US in hydrogen production, “which makes it less dependent on external factors”.
Earlier this year, EU Energy Commissioner Kadri Simson said that “renewable energy sources, including renewable hydrogen, is a central element of the REPowerEU plan, which is the EU strategy to get rid of Russian fossil fuels as soon as possible.” The EU plans to produce 10 million tons of hydrogen by 2030 and import a further 10 million tons.
Denis Gorbunenko also notes that the US may attract investment in the battery field but adds that Europe has its ambitions in this sector.
“In the field of electric vehicles, there is a positive dynamic of both: growth of sales in the USA and growth of exports from the EU. This shows the mutually beneficial competition that stimulates the development of both regions,” the expert says.
Denis Gorbunenko believes that the protectionist measures adopted by the United States a year ago related to assistance to green business, and known as the Inflation Reduction Ac, although they are a means of competition, “but they are directed not so much against the EU as against large global competitors, including China.”
“Negotiations between the US and its traditional allies, including the EU, are aimed at certain agreements that reduce the risk of outflow of investment,” he adds.
