According to Reuters article published on March 8, 2023, billions of dollars in clean energy incentives are poised to speed investment on American soil while putting the European Union's energy transition at risk by luring away money and talent, executives at the CERAWeek energy conference said this week.
U.S. President Joe Biden's landmark Inflation Reduction Act climate package was signed into law last year and has caused trade tensions between Washington and allies competing for cash and skilled labor to advance a shift from fossil fuels and combat climate change.
Europe can ill afford to see a slowing in the energy transition as the continent struggles with soaring gas and power prices since Russia's invasion of Ukraine.
The IRA directed some $370 billion in tax benefits to U.S. development of solar, wind, geothermal and other renewable energy technologies, as well as to electric vehicles and projects that reduce or capture industrial greenhouse gas emissions before they reach the atmosphere.
On Wednesday, U.S. Energy Secretary Jennifer Granholm said the Biden administration makes no apologies for the IRA, and challenged EU allies to follow the U.S. lead by providing more subsidies of their own.
"We don't want to stoke trade wars or anything like that," said Granholm. "We keep saying 'have at it - you should do the same thing' - a little friendly competition is all."
"But we are serious about bringing supply chains back into this country," she said.
She called the U.S. incentives "10 years of IRA carrots you can take to the bank" and said more than 100 companies in the electric vehicle supply chain had announced investments in the United States since the law passed.
European energy companies echoed the call for Europe to come up with its own new incentives.
"It would be great to see the European Union policy move from stick to carrot," said Josu Jon Imaz, chief executive officer of Spanish energy provider Repsol SA (REP.MC). "We don't need banning technologies, we don't need restrictions, we need to be attractive."
Repsol this year expects to spend almost 40% of its project budget in the United States, including $1.5 billion in oil and gas and $1 billion in renewables, compared with 25% going into the Iberian peninsula, Imaz told Reuters.
"Simplicity is from my point of view one of the main features of the IRA and that is very important for investors... you have a broad possibility to invest in many areas in the United States," he said.
Patrick Pouyanne, CEO of French energy giant TotalEnergies told the conference the IRA was an "invitation to accelerate green infrastructure."
"Fundamentally, you see it as an opportunity when you put incentives. In Europe, you begin to regulate," he said, adding that Europe and the United States should consider forming a free trade agreement on renewable energy infrastructure.
"We like the IRA," said Sanjiv Lamba, CEO of hydrogen producer Linde Plc. It is simpler and easier to understand than the EU's lengthy policy statements, he said.
Takajiro Ishikawa, chief executive of Mitsubishi Heavy Industries Americas, also said the IRA is an investment magnet.
"All of the capital from advanced countries and even developing countries is flooding to America to take part of the investment that stems from the IRA," Ishikawa said
He cited a direct pay component of the Act, which allows foreign entities to benefit directly from its incentives.
"You have Uncle Sam paying you for that tax incentive... it's earth-shattering," said Ishikawa, whose firm is involved in hydrogen development and carbon capture and sequestration.
Ken Gilmartin, CEO of British engineering firm Wood Plc, said the IRA would put the United States in first place in the decarbonization race.
"That is not a sentence I thought would say five years ago," he said, noting that former President Donald Trump had withdrawn the U.S. from global efforts to fight climate change.
U.S. executives offered more tempered enthusiasm for the incentives, saying permitting obstacles can add years to development of pipelines or carbon sequestration sites.
White House energy adviser John Podesta said during the week that the Biden administration was working to reduce complexity and timelines for permitting and hoped the U.S. Congress could pass comprehensive reform of the process.
