The Inflation Reduction Act (IRA), Joe Biden’s $369 billion energy transition plan to support American businesses, is causing serious concern in Europe. European industrialists, weakened by soaring energy prices, must now take up the challenge of remaining competitive against subsidized American companies. In this context, it is tempting to cry foul and blame the United States for the fragility of the European industrial model where the support schemes granted do not represent more than a third of what the Americans do.
Some policy makers are convinced that the United States aims to weaken European industry. First, the IRA allows them to capture corporate investment away from Europe. Secondly, it divides the European countries on the response to be made, the small economies refusing the establishment of state aid which would only benefit France or Germany. It also and above all allows the United States to take a decisive lead over the old continent in terms of innovation in the field of green technologies. Thus, while giving Americans the means to invest and innovate in the green economy, the ERI enables them to outpace their European competitors.
Would the IRA then be the perfect economic crime? No. This plan, which is to be taken very seriously by Europe, has only exposed the weaknesses of our industry. The current situation stems above all from the lack of investment and state support for several years in the technologies of the future, which has penalized the competitiveness of European companies. Europeans have not given themselves the means to act to massively support the transformation of their industry. Just as the United States sent a strong signal, Europe must follow a similar path without wasting time, which is essential to maintain our political independence on the world stage.
Rather than trying to find a culprit, we must invest quickly and massively in the technologies of tomorrow on European territory: hydrogen, photovoltaic, biothermal, hydraulic, wind, lithium batteries… and promote the rapid establishment of factories that guarantee innovative productions on European soil. In France, the phase of issuing the authorizations necessary for the establishment of a factory can be spread over several years while it only requires a few months elsewhere!
Rather than criticizing the American plan, action must be taken at national and European level. Several avenues have been proposed to promote European production, and they are going in the right direction. The French government, followed by Ursula von der Leyen in announcing the European plan on February 1, proposed the reallocation of existing European funds worth around 250 billion euros to support strategic industrial sectors in the Union . If the support plan for European industry amounts to hundreds of billions, it is above all necessary to ensure that the earmarking of funds is effective. The goal should not be to “preserve” or subsidize the jobs of yesterday, at the risk of making things worse, but those of the future.
The European “green deal” response presented by Ursula von der Leyen also proposes the temporary relaxation of state aid for them to invest in green technologies until December 31, 2025 to encourage the emergence of an industry. of a carbon-free future. This relaxation is essential. Remember that, thanks to the measures planned by the IRA, American green industries will tomorrow be able to benefit from public aid from two to six times greater than that authorized by European regulations for similar activities, if we do not act!
*By David Dupont-Noel, Deputy Managing Director of Deloitte France and Francophone Africa.
