Germany plans to respond to the U.S. initiative on environmental subsidies by streamlining the distribution of existing European Union funds and increasing incentives at the national level, rejecting calls from countries including France for more aggressive bloc-wide measures, Bloomberg wrote.
The German government's new proposal is a reaction to President Joe Biden's $369 billion climate law, dubbed the Inflation Reduction Act, which sources say provides unfair subsidies to U.S. manufacturers.
Chancellor Olaf Scholz and Economy Minister Robert Habeck see no urgent need for a pan-European subsidy program, since there are still billions of euros of unused funds in existing programs. They also oppose the introduction of protectionist provisions requiring manufacturers to use European products, as this would undermine the EU's free trade program.
Germany's new plan could irritate countries that insist on a stricter EU-wide response, since not all countries have the same financial capacity to support their domestic companies. Sources said Germany plans to spend more than 10 billion euros on investments in companies switching to clean technologies.
European Commission President Ursula von der Leyen has approved a revision of state aid rules and the creation of a European fund for investment in clean technology. French President Emmanuel Macron has long pushed for a so-called "Buying European" law that would leave public tenders and subsidies to manufacturers on the continent.
The new U.S. law would subsidize North American companies, including manufacturers of electric cars. France's finance minister accused Washington of pursuing a "China-style" industrial policy that discriminates against non-U.S. companies, and the EU said it could file a complaint against the U.S. with the World Trade Organization over the law.
Scholz and Habeck are pushing for the reopening of free trade negotiations between the EU and Washington to conclude an agreement on industrial tariffs or a duty-free economic zone for technologies that contribute to "green transformation."
The German government hopes this will make it easier for the U.S. to grant Europe similar waivers from the Inflation Reduction Act, as it has done for Canada and Mexico, because the waivers are tied to their free trade agreement. Earlier this month, Biden said he saw an opportunity to adjust the law to make it easier for European countries to participate, without going into detail.
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