EU Commissioner Warns U.S. Clean Energy Spending Could Backfire

The Biden administration’s massive energy transition spending plans risk hurting the relationship between the U.S. and the EU by pushing the latter closer to China, the bloc’s trade commissioner has warned.

According to Valdis Dombrovskis, as quoted by the Financial Times, the Inflation Reduction Act, which stipulates spending of some $369 billion, most of its for the energy transition, could make “overtures and propositions” from China to the EU more appealing.

Should this happen, he went on to add, it “may work against the stated aim of the Inflation Reduction Act”.

Earlier this month, French President Emmanuel Macron also criticized the Biden administration’s spending bill, saying it could fragment the West. The warning came after Macron slammed the IRA during a visit to the U.S., saying it would hurt the competitiveness of European businesses.

“The choices of the past few months, in particular the IRA, are choices that will fragment the west,” the French president said during his visit to Washington, as quoted by the FT. “We need to co-ordinate and re-synchronise our policy agendas.”

Separately, he said that the EU should come up with an in-kind response to the IRA, and soon.

“When you have two superpowers massively subsidise some sectors, you could decide not to do anything, to respect the rules and the purity of (free-market) doctrine … but nothing much will be left (in Europe) in the end,” the French president said earlier this month, as quoted by Reuters.

He then went on to suggest the EU spends the equivalent of 2 percent of its combined GDP on such a spending plan.

The European Commission has also chimed in, saying the billions in green energy and EV subsidies that the IRA envisages are discriminative towards European Union companies and represent a threat to the EU’s industrial base.