Emmanuel Macron warned that the US risks “fragmenting the West” with a climate law subsidizing US companies to the detriment of European industries.
Macron’s criticism on the first day of his state visit to Washington underscores growing anxiety in Europe over the so-called Inflation Reduction Act and its $400 billion worth of incentives to finance the green transition. EU member states have been particularly hard-hit by subsidies for US-made electric cars and tax breaks to promote industries such as renewable energy and batteries.
While its aims to help businesses and consumers switch to green technologies were laudable, the law would have negative repercussions for Europe by making it less attractive for businesses to invest there, Macron said.
“The elections of the last 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 coordinate and re-synchronize our political agendas.”
Earlier Wednesday, at a closed-door lunch held in Congress with executives and lawmakers, Macron called the IRA “super aggressive for our companies,” according to a person who attended the event. “Maybe 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 will also have to discuss the war in Ukraine, its economic consequences in Europe and relations with China.
French officials said they were in discussions with their US counterparts about possible remedies to help avoid distortions in sectors such as electric cars and renewable energy.
One option would be for the U.S. to add the EU to the list of countries whose products can benefit from subsidies, similar to how Mexico and Canada are treated because of existing trade agreements, officials said. But getting the U.S. to change its approach has proven difficult since Congress has already passed the law.
The Biden administration has defended the IRA as necessary to boost the electric car sector and help fight climate change in the US. It has called on Europe to come up with its own subsidy scheme in response.
John Kirby, a spokesman for the National Security Council, said there had already been “very productive discussions” about 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 working group with the EU on the matter and will continue discussions, he said.
Macron has also called on the EU to approve a so-called “Buy European Law” that will offer similar subsidies to local industries. Other countries such as Germany are less favorable to the idea. On Thursday, EU competition commissioner Margrethe Vestager expressed caution about it because it would take time to implement.
“Since we have to act within a reasonable time frame, we are trying to see how we can best use the tools we have,” he told a news conference in Paris.
Additional reporting by Sarah White and Javier Espinoza
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