Although Brussels understands that some aspects of the US Inflation Reduction Act go against free trade, the law offers the best opportunity for transatlantic climate cooperation in years.
The new climate policy of the United States, which forms part of the Inflation Reduction Act, has upset the authorities of the European Union. They consider herdiscriminatory” and “incompatible with the World Trade Organization”. EU Trade Commissioner Valdis Dombrovskis it states that Brussels is assessing how to respond to this likely breach of trade rules, while other EU trade policy makers complain of “an important new trade barrier transatlantic by the US” and make it clear that the EU “will take the measures necessary to defend their interests.
Still, the new law heralds the best time for transatlantic climate cooperation in years.
Green subsidies ‘for the US only’
Wait to? The paradox is between a general favorable environment and specific disagreements. The fact that the US Congress has approved the first Comprehensive climate law in the nation’s history favors understanding. However, there are major disagreements over specific aspects of US climate policy that are irritating US trading partners in Europe. and beyond. The latter are the provisionsBuy American” (American purchase) of the Inflation Reduction Law, the new US law that will spend nearly $400 billion on energy and climate action over the next decade. Much of this spending – like the $37 billion for clean energy manufacturing incentives, or the $36 billion for clean fuel and vehicle tax credits – favors American producers at the expense of European and other foreigners (especially Chinese). ).
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For example, if a wind farm is installed in the US, there will be additional tax benefits if enough US steel is used to meet the local content threshold. Electric vehicle producers have an even bigger advantage: To be eligible for the full $7,500 in tax savings, an electric vehicle must be assembled in North America (that is, in the NAFTA member states of the US, Canada, and Mexico). In addition, the legislation requires that by 2024 the 40% of a battery’s materials come from North America or a country with which the US has a free trade agreement, and the requirements on homemade components will increase over time. These laws are a shock to a trading system built on the non-discrimination principle between “like” products, whether made at home, by a close ally, or by a rival who happens to also be a WTO member.
“With a widespread increase in subsidies for semiconductors and batteries (…) there is a risk of a shift towards a selfish ‘beggar thy neighbour’ approach to international trade”
America’s trading partners are right to point to these violations of world trade principles, which can increase costs for all and reduce ties between nations. Sabine Weyand, Director General for Trade at the European Commission, hits the nail on the head when she says that an across-the-board increase in subsidies for semiconductors and batteries could be ineffective and “very expensive”: there is a risk of a shift towards a self-serving “beggar thy neighbor” approach to international trade. And it is true that the EU’s controversial trade policy aimed at protecting the climate, the Carbon Border Adjustment Mechanism (CBAM), is much more compatible with WTO principles than subsidies. US organic. The EU wants Washington to give tax benefits to all electric vehicles, regardless of where they are produced.
Hardly
However, Brussels needs to understand how close this US climate victory has been, how close the US has come to wasting two years of Democratic control and passing no climate legislation at all. For much of the summer, it seemed the concerns of Joe Manchin, a conservative Democratic senator from the mining state of West Virginia who supports Republicans, would block any bill. And suddenly, in a chaotic week in August, while much of Europe was on the beach, the US Congress approved huge sums to green the US economy. most of analysts now expect greenhouse gas emissions emitted by the US, which in 2021 were 17% lower than their 2005 peak, be reduced by 40% below 2005 levels by 2030, which would put the US within considerable part of its commitment to the Paris Agreement. Considering where transatlantic climate cooperation found itself just a few months ago, trade disputes over big green grants are “first world problems” or what the Germans call “Luxusproblem” (luxury problems).
“Given The Situation Transatlantic Climate Cooperation Was In, Trade Disputes Over Big Green Grants Are ‘First World Problems'”
The Inflation Reduction Act passed the US Senate with a slim margin, with Vice President Kamala Harris breaking a tie in its favour. This means that the Democratic Party needed to deploy every possible narrative to get this climate bill passed. The national security narrative, the need to produce more strategic goods at home and not be as dependent on China? Done. The narrative of national power, the need to “strengthen American industry” and “support to the workers Americans”? Done. For European leaders currently turning to friendly nations What USA to replace gas from Russia, and which grant massive grants to sustain EU industry in the midst of an energy crisis, these motivations should be understood.
Nationalist motivations to save the planet?
Yes, the logic of efficiency (and trade) suggested that the US should have taxed harmful carbon emissions instead of giving subsidies to US workers who buy US vehicles powered by US batteries. On the other hand, the urgency of the climate crisis and the complicated political economy of the energy transition in the US demanded that the US Congress do “something” of ipso facto, and that American workers reap more immediate benefits than mitigate global suffering for decades to come.
“It took a nationalist framework and a challenge from a geopolitical rival to get Washington to pass a serious climate bill”
There is a larger issue at stake. Can nationalism be a useful motivating force in addressing the climate crisis? Scholars from different traditions disagree. For Geoff Mann and Joel Wainwright, the leftist authors of Climate LeviathanNationalism cannot animate effective climate justice politics as it has in past struggles to change the world, such as the anti-colonial movement in India in the 1940s or the anti-apartheid movement in South Africa in the 1980s; a much larger transnational movement is needed. While for Anatol Lieven, author of Climate Change & The Nation-State: The Realist Case, nationalism is the most important force in motivating people to invest in the welfare of future generations. What is clear is that, in the case of the US Inflation Reduction Act, it took a nationalist framework and a challenge from a geopolitical rival to get Washington to pass a serious climate bill.
When questioning the climatic regulations of the style “America First” (America First) In forums such as the EU-US Trade and Technology Council, the European Union must weigh its legitimate trade interests against global climate goals. Disagreements over green subsidies between two close allies cannot be allowed to further derail the long-delayed energy transition. adapting a fredric jameson quote about the end of capitalism, it is easier to imagine the end of the world than a background review of global trade rules to allow more green subsidies, and that is not a good thing.
Article originally published in English in the Web of Internationale Politik Quarterly.
