Global Impacts Of Biden New Energy Supports

The green subsidy race and how it’s changing the global economy; Western governments are jostling to boost their competitiveness, particularly through investing in green technology; we look at this return of industrial policy and its implications for the world economy

Irene Lauro, February 20, 2023 (Schroders)

“…[The Biden administration’s August 2022 Inflation Reduction Act (IRA) is] the most significant climate action yet to have followed from the Paris Agreement of 2015…[Its tax breaks and subsidies worth $369 billion represent] a new industrial strategy…By limiting the cost of clean energy production and creating certainty it is likely to make the energy transition cost-effective for the long term…[The EU’s January 2023 Net-Zero Industry Act (NZIA) will help] protect its leadership in clean energy, addressing the potential loss of competitiveness to the US and the risk of energy-intensive industries relocating…

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…[The NZIA will] simplify and fast-track permitting for new clean tech production along] the entire supply chain…[and the Critical Raw Materials Act] is set to ensure access to critical minerals and metals by diversifying sourcing and reducing dependence on highly concentrated supplies from third countries…[It is] a more simplified regulatory framework for production capacity…[and eases subsidy rules for] key product sectors including batteries, wind-turbines, heat pumps as well as technologies such as solar, electrolyser and carbon capture and storage…

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…[The challenge is that disparate EU fiscal capacities could lead to] harmful subsidy races and weakening of regional development…[And though the price on carbon through the EU ETS has already incentivised the decarbonisation of the European energy sector, concerns remain in the EU] over green protectionism due to the discriminatory nature of the US incentives…[Though a transatlantic trade war is unlikely, countries] that will not take part to this green subsidy race, like the UK, will be more exposed to foreign competition…[and miss] employment and investment opportunities…” click here for more

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