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France and Germany urge US to expand green energy exemptions

France and Germany called Monday on the United States to expand exemptions to domestic production requirements under its massive programme to encourage a green energy transition.

Washington’s landmark Inflation Reduction Act contains around $370 billion in subsidies for green energy, as well as tax cuts for US-made electric cars and batteries, to accelerate the transition to a low-carbon economy.

EU countries have poured criticism on the IRA, seeing the domestic production requirement as a threat to European jobs, especially in the energy and auto sectors.

The IRA has exemptions for products from its trade bloc partners Canada and Mexico, and France and Germany called Monday for such exemptions to be expanded to EU nations.

“It is in our mutual interest to rapidly find common ground” on the issue when Europe and the United States are “cooperating to face Russia’s war against Ukraine,” France’s finance minister Bruno Le Maire and his German counterpart Robert Habeck said in joint statement.

France and Germany want a solution where “European products are eligible for US tax credits in the same manner as American products are,” they added.

The two ministers and European Commission officials are expected to visit Washington soon in the New year to try to resolve the situation, a source told AFP.

EU nations have been divided on how to respond to the IRA, with French President Emmanuel Macron urging Europe to adopt its own lavish subsidies while German Chancellor Olaf Scholz has favoured dialogue with Washington.

The ministers’ joint document advanced proposals for responding to the US subsidies, but EU subsidies were not among them.

It did, however, propose to simplify rules for EU state aid and tax credits.

“We will use all of the instruments of EU trade policy to preserve the common market… and guarantee equitable competition conditions on the global level,” said the document.