America’s green subsidies are causing headaches in Europe (The Economist – December 1, 2022)

For years, Europe has nagged the world to follow its lead in cutting carbon emissions. In August America’s federal government at last heeded its advice; President Joe Biden signed a jumbo package of green subsidies. Far from pleasing Europe, the “Inflation Reduction Act” (ira), which will dole out $369bn in corporate bungs as early as January, has caused a transatlantic spat.

Talk of a trade war pitting Europe against America is brewing even as both are allies in a real war in Ukraine. By mimicking policies that many Europeans favour, America has stoked strife among its friends.

Europe wants America to go green, but not like this. The primary gripe of the eu, which deals with matters of trade on behalf of its 27 member states, is that vast swathes of the ira are earmarked for companies making stuff in America (or its immediate neighbours, Canada and Mexico).

Electric cars assembled in North America, for example, will qualify for a tax break worth up to $7,500; those even part-made in Europe will get nothing.

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