EU poised to copy US subsidies for green technology – new evidence from China shows how it could backfire

(The Conversation, 21 Feb 2023) The EU is preparing to abandon its longstanding restrictions on state aid to take on US and Chinese subsidies over green technologies.

European Commission president Ursula von der Leyen is spearheading a new commitment from EU leaders to “act decisively to ensure its long-term competitiveness, prosperity and role on the global stage”.

She has talked about the need to counter hidden subsidies from the Chinese, both in green tech and in other sectors, though the trigger for the EU’s new approach is really President Joe Biden’s Inflation Reduction Act (IRA). This has committed the US to a record US$369 billion (£305 billion) to green its economy, including using tax breaks and subsidies.

It effectively tears up the international consensus around not using state aid, embracing what the US has railed against for years. The Economist has said that globalisation is no longer about racing, but racing and tripping others.

The EU is now proposing to introduce its own tax credits and subsidies for cleantech companies, as well as fast-tracking regulation in this area.

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The Conversation, 21 Feb 2023: EU poised to copy US subsidies for green technology – new evidence from China shows how it could backfire