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Despite an eagerness to compete the EU remains 'less attractive' for clean tech investment and development compared to US, according to new BloombergNEF report
The US remains a far more attractive market to invest in and develop clean technologies than Europe, with the EU still struggling to compete with the generous subsidies and trade policies offered under the landmark Inflation Reduction Act (IRA).
That is according to a new analyst from BloombergNEF, which concludes the EU is still "less attractive" as a place to develop and deploy clean tech, with the bloc continuing to trail far behind the US in terms of green technology subsidies and proving more reticent in its deployment of trade barriers to protect domestic industries.
Promising $370bn of support for US climate and clean energy projects, the IRA legislation which came into force two years ago "sent shockwaves across the globe, spurring governments to rethink their own industrial policies", BloombergNEF said in fresh analysis published yesterday.
In the wake of the IRA, a number of economies sought to expand their clean tech subsidy programmes, with the European Union to the fore with its plans for a raft of ambitious new targets and a suite of new green policy frameworks under the banner of its 2023 Net Zero Industry Act.
However, BloombergNEF's analysis argues there is still a widening gap between the US and the EU in terms of policy support, adding that Europe would need to offer more funding, subsidies, and tighter trade measures if it is to compete with Washington on clean technology investment and green industry development.
As it stands, US tax credits - some of which have no budgetary cap - are expected to make as much as $271bn in manufacturing subsidies available over the coming years, and many of these exclusively target specific sectors such as batteries, electric vehicles (EVs) or solar equipment, which BNEF said sent a "strong signal" to these markets that they can expect generous government support.
In contrast, the EU currently offers barely a sixth of what the US is providing through clean tech tax breaks, and what support there is tends to be far less focused meaning the benefits are spread more thinly across multiple sectors, the analyst firm said.
As a result, it warned the EU is currently "punching below its weight as fiscal constraints hinder capital development".
The report also highlights the stark differences between the US and the EU on trade policy, noting that US local content rules are relatively stringent for EV and battery subsidies, even if they are limited in scope.
The EU's approach to local content requirements is far more relaxed with France being the only nation in the bloc which is deploying tougher trading policies in this regard, the report notes.
Similarly, while the US is hiking tariffs across the board on imported clean technologies, BloombergNEF said proposed EU tariffs on EVs manufactured in China were "more tentative".
"The EU boasts a greater number of industrial policies relevant to clean tech than the US," the analysis states. "But many of these are less restrictive than those imposed by the Biden administration. Playing by World Trade Organisation's rules has dampened the EU's willingness to wield swinging tariffs or strict domestic content rules. And unlike the IRA, the EU lacks specifics on how it will fund clean-tech manufacturing support."
However, the analysis also highlights the significant scope for major political upheaval over the coming year that could either widen or shrink the gap between the two markets in terms of attractiveness to clean tech development.
Most notably, BloombergNEF warned that generous US clean tech incentives could be significantly curtailed if Donald Trump returns to the White House after the upcoming Presidential election on 5 November, given his stated opposition to the IRA package and his vociferous criticism of climate action and clean technologies more broadly.
Conversely, the EU is working to build on existing onshoring policies to ramp up domestic clean tech manufacturing capability, with the analysis highlighting the recent report by former Italian Prime Minister Mario Draghi for the European Commission which called for more public investment in key sectors such as clean tech manufacturing.
"Trailing on subsidies and reticent to deploy trade barriers, [the EU] is less attractive as a place to produce climate tech," said BloombergNEF. "But that could change as the European Commission is set to build on existing onshoring policies, and the potential of a Republican presidency poses a threat to the lucrative US incentives."
The UK is in a broadly similar boat with the government having struggled to match the level of green subsidy support on offer on the US, but with the new Ministerial team looking to beef up the country's green industrial strategy.
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