Papers with the Inflation Reduction Act and US flag.

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Green tensions are spilling into the open ahead of a U.S.-EU ministerial meeting on Monday of the Trade and Technology Council. The bloc claims that the Americans aren’t creating a level playing field, with much of the $370B Inflation Reduction Act going towards clean technology. The green energy subsidies and tax breaks are aimed at boosting domestic production for U.S. companies as the government plow billions into businesses involved in electric vehicle technology and the energy transition.

Quote: “The new assertive industrial policy of our competitors requires a structural answer,” declared Ursula von der Leyen, the president of the European Commission. “There is a risk that the Inflation Reduction Act could lead to unfair competition, could close markets and fragment critical supply chains. We must take action to rebalance the playing field… to improve our state aid frameworks. In other words: We need to do our homework in Europe and at the same time work with the U.S. to mitigate competitive disadvantages.”

Things are looking even more intense after the head of the European Parliament’s trade committee said that elements of Inflation Reduction Act would mean that the EU needs to file a complaint at the World Trade Organization. It’s not only about luring investors away from Europe, but also shutting out European companies that could benefit from the tax breaks and subsidies that are only available for U.S.-based businesses. Some even think that things could quickly morph into a trade war if things cannot be settled diplomatically.

More assertive policies: “We are very careful to avoid distortions in our single market, but we must also be responsive to the increasing global competition on clean tech,” von der Leyen continued. “If we see that investments in strategic sectors are leaking away from the EU, this would only undermine the single market. That is why we are now reflecting on how to simplify and adapt our state aid rules.”