Emmanuel Macron says US climate law risks ‘fragmenting the west’

Emmanuel Macron warned that the US risked “fragmenting the west” with a climate law by subsidising American companies to the detriment of European industries.

Macron’s criticism on the first day of his state visit to Washington underlines the growing anxiety in Europe over the so-called Inflation Reduction Act and its $400bn worth of incentives to fund green transition. EU member states have been particularly exercised by subsidies for electric cars manufactured in the US and tax credits to promote industries such as renewable energy and batteries.

While its objectives of helping companies and consumers move to green technologies were laudable, the law would have negative repercussions for Europe by making it less attractive for companies to invest there, Macron said.

“The choices of the past few months, in particular the IRA, are choices that will fragment the west,” Macron said at the French embassy in Washington on Wednesday evening. “We need to co-ordinate and re-synchronise our policy agendas.”

Earlier on Wednesday at a closed-door lunch held at Congress with executives and lawmakers, Macron called the IRA “super-aggressive for our companies”, according to a person who attended the event. “Perhaps this law will solve your problems but it will make mine worse,” the French president said, adding that many jobs would be destroyed.

The issue is expected to weigh on the discussions between Macron and Joe Biden, who are also due to talk about the war in Ukraine, its economic fallout on Europe, and relations with China.

French officials said discussions were under way with their US counterparts about possible remedies that would help avoid distortions in sectors such as electric cars and renewable energy.

One option would be for the US to add the EU to the list of countries whose products can qualify for subsidies, similar to how Mexico and Canada are treated because of existing trade agreements, the officials said. But it has proven difficult to get the US to change its approach given that Congress has already passed the law.

The Biden administration has defended the IRA as necessary to boost the electric cars sector and help fight climate change in the US. It has called on Europe to come up with its own subsidy regime in response.

John Kirby, a spokesman for the National Security Council, said there had already been “very productive discussions” on the IRA and that “the team here is exploring options”. He declined to say whether concrete proposals would be made during Macron’s visit. The US has a task force with the EU on the matter, and it would continue discussions, he said.

Macron has also called on the EU to pass a so-called “Buy European Act” that would offer similar subsidies to local industries. Other countries such as Germany are less supportive of the idea. On Thursday the EU’s competition commissioner Margrethe Vestager expressed caution about it because it would take time to implement.

“Since we need to take action within a reasonable timeframe, we try to see how we can best use the tools that we have,” she said at a press conference in Paris.

Additional reporting by Sarah White and Javier Espinoza

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