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US to overtake Europe as top clean energy destination for investors?

But the Inflation Reduction Act has raised a few hackles this side of the pond

One of the top people at Spainish electrical utility company Iberdola has said that the US is a more-attractive destination for clean energy investment than Europe.

Speaking to the Financial Times, Ignacio Galán, executive chair of the firm, said that the US’s Inflation Reduction Act of 2022 made the country a ‘very much’ more appealing place in which to invest. In speaking with the paper, Galán criticised the EU’s proposed cap on electricity generation revenues and his home country’s potential windfall tax on big energy companies.

“The key issue,” he said, “is that these measures can create uncertainty.”

The FT said Galán welcomed one of president Joe Biden’s signature legislative acts.

Galán said: “The US government took longer to take the climate change theme seriously. But now they are committed to it they are putting in all the necessary support.”

According to the Biden administration, the Inflation Reduction Act of 2022 ‘[…] will make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40% by 2030′.

The bill, write the Democrats, will also allow Medicare—the US government’s healthcare programme—to negotiate on prescription drug prices, while expanding the Affordable Care Act program for an additional three years.

The European Union has not reacted to the new act with joy. According to CNBC, it has listed at least nine points in which it said that it could breach international trade rules.

CNBC wrote: “One of the biggest sticking points for the Europeans is the tax credits granted for electric cars made in North America. This could bring challenges to European car makers that are focusing on EVs, such as Volkswagen.”

Others have said that they are ‘very concerned’ over the legislation’s impact on Europe.

On its website, Renew Europe—a political group within the European Union—pointed out what it described as issues with the ‘at least’ $370bn that the US government will subsidise domestic companies with.

Renew Europe wrote: “This approach to international trade is contrary to the World Trade Organisation agreements and we should cooperate in good faith between historical allies. Inflation is still not under control in Europe and 2023 could be a year of recession. It is in this critical context that this legislation will undermine Europe’s recovery efforts. This measure will be counterproductive, as it will weaken Europe’s position vis-à-vis China and other close US economic partners, such as Canada, at a time when geopolitical competition between the United States and China is at its peak.”

It added: “Europe wants to remain an open economy, but it will not remain silent. Cooperation and trust in finding sustainable solutions to our common serious challenges are key between allies, as exemplified by the Trade and Technology Council. We welcome the launching of the US-EU Task Force, as dialogue should always prevail, but the European Commission must stand ready to react against protectionism.”

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