‘EU can’t compete with the US IRA’

‘EU can’t compete with the US IRA’

‘EU can’t compete with the US IRA’ 150 150 Batteries International

June 7, 2024: Europe cannot keep up with the vast sums of money being thrown at the electric vehicle and energy storage industries through the US Inflation Reduction Act.

This was a key message of speakers at the EUROBAT general assembly and forum this week which was held in Brussels, Belgium.

In his opening speech, Marc Zoellner, president of the trade organization, called on EU policy makers to try and match the US manufacturing stimulus to ensure the EU industry remains competitive.

The IRA, which was launched in July 2022, contains $369 billion in new spending and tax breaks that aim to boost clean energy, reduce healthcare costs, and increase tax revenues. This was later increased to near $500 billion. When all the possible lines of credit are extended the final bill to the US taxpayer is likely, analysts say, to be over $1 trillion.

Fabian Zuleeg, chief executive of the European Policy Centre, said at the EUROBAT forum that the EU could never match the IRA nor compete with what the US and other countries such as Australia, Canada, Japan and South Korea had put on offer.

“There are three reasons for this,” he said. “The first is that there are no instruments available to dispense with this money. Tax relief in the US is given at the federal level. The EU is not in a position to offer any Europe-wide tax benefits across its whole geography.

“Second, the subsidies that are available are still very much at a national level and are distributed in a partisan fashion by the individual state governments.”

The last reason, perhaps the most prosaic, was “we simply don’t have that sort of money to give away,” he said.

The implications of this are profound, putting Europe at a critical disadvantage when trying to become a battery powerhouse for the future. In addition, the US subsidies are luring European battery manufacturers away from the continent to America.

Although Europe has introduced the Critical Raw Minerals Act, there is no funding package tied to the act (though some €3 billion ($3.15 billion) has been set aside for innovation funding).

“The result,” says Chris Heron, communications and public affairs director at Eurometaux, “is that Europe is at a severe disadvantage. Although other factors need to be included, the fact remains that it is two to three times more capital intensive to build a gigafactory in Europe than elsewhere and 15%-20% more expensive to run.”