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US, EU Hope to Hash Out Electric Vehicle Credit Tiff

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

The European Union’s concerns over the Inflation Reduction Act’s modified tax incentives for purchases of electric vehicles have been acknowledged, according to President Biden’s chief foreign affairs adviser.

On December 5, the third U.S.-EU Trade and Technology Council (TTC) Ministerial Meeting was held at the University of Maryland, College Park campus. Among the meeting’s agenda was the EU’s contention that the inflation bill’s EV tax credits put European automotive manufacturers at a competitive disadvantage.

“We’ve heard concerns clearly from our European friends about specific aspects of the [Inflation Reduction Act],” said US Secretary of State Antony Blinken about the progress of the EV talks at a joint press conference following the meeting. “As soon as we heard those concerns, we agreed to establish a task force between the United States and the [EU] that is up and running.”

“I think we advanced that discussion,” he continued. “I’m convinced that we’re continuing to give momentum to that conversation and to working through the differences.”

A draft of a joint statement by US and EU officials read that the US aims to address the EU’s frustrations “constructively,” as reported by Reuters before the meeting was held.

The Inflation Reduction Act modified the EV credit with changes that will be phased in over time. Already in effect, though, is that qualifying “clean” vehicles must be assembled in North America. The maximum value of the credit is $7,500, based on a calculation factoring in a vehicle’s battery capacity. See Checkpoint’s New Clean Vehicle Credit Compliance Checklist for determining eligibility. The White House’s new clean energy tax credit landing page also explains the revised credit, including a list of vehicles that qualify in 2022.

In a December 4 speech addressing the College of Europe in Bruges, Belgium, European Commission President Ursula von der Leyen said the legislation may “lead to unfair competition, could close markets, and fragment the very same critical supply chains that have already been tested by COVID-19.”

She clarified while competition is a good thing and drives down prices for green technologies, such “competition must respect a level-playing field,” emphasizing there should be a “race to the top” that creates jobs and makes clean energy “more affordable worldwide.”

Biden on December 1 said that the inflation bill’s energy components were not meant to negatively impact Europe, and implied that there could potentially be “tweaks” to accommodate non-North American countries but did not elaborate on how such changes would be made.

Nonetheless, preliminary work on the EV issue appears to be headed in the right direction. European Commissioner for Competition Margrethe Vestager said Monday’s discussion of the inflation bill’s potential ramifications for the European industrial base were “of critical importance to enhance the relationship that we have created within the framework of the [TTC].”

“But the most important thing is probably that the US is fully engaged in fighting climate change,” she added. “I think that is absolutely the best news.”

Valdis Dombrovskis, European commissioner for trade, said that the EU officials left the meeting on a “slightly more optimistic side” than going in.

For more on the inflation bill’s EV provisions, see Client Letter: Changes in the Section 30D Electric Vehicle Credit (09/20/2022).



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