US green subsidy hammer: "Fear of chlorine chickens was a big mistake"

The Inflation Reduction Act (IRA) is a gigantic climate protection package that could cost many jobs.

US green subsidy hammer: "Fear of chlorine chickens was a big mistake"

The Inflation Reduction Act (IRA) is a gigantic climate protection package that could cost many jobs. Because the US government is luring European companies in particular to the United States with subsidies of almost 400 billion dollars for green technologies and is endangering local industry. Peter Liese found the cause quickly: If the EU had concluded the TTIP free trade agreement almost ten years ago, the problem wouldn't exist today, he says in ntv's "Climate Laboratory". Nevertheless, the MEP from the CDU cannot imagine that the USA will outstrip the EU when it comes to climate protection. Because innovation funds, corona reconstruction funds and structural funds also contain hundreds of billions of euros for renewable energies and energy efficiency. With the European emissions trading there is also a system that encourages a reduction in consumption, says Liese. But even the EU politician has to admit: The European set of rules is different from the American one, a chilling mess. When the IRA was passed, there were many complaints in Europe. Is the US the new climate croesus? Have they replaced the EU as the green pioneer?

Peter Liese: It's good that Donald Trump is no longer US President and that Joe Biden is making efforts to protect the climate, but with the IRA he's certainly not climate change. First, he entered the debate with much more ambitious proposals than he later came out of the Senate and House of Representatives. The very name IRA is an expression of the compromises he had to make.

Second, Biden has pledged to reduce American emissions by 50 percent by 2030. But he will probably do less. The EU has pledged to cut its emissions by 55 percent by 2030 and is likely to do more. With the legislation that has been passed, we are at 57.5 percent. In the end, the EU will emit four tons of CO2 per capita and the Americans still ten.

So the IRA is much hot air about nothing then?

No, it's a change in American policy. There is finally a President who is tackling the issue. But neither the instruments nor the goals are sufficient. In Europe, if we came up with such modest goals, we would be kicked out by everyone interested in climate protection. But the US is challenging us in terms of jobs and industry.

Does the US appear to be overtaking Europe because the US is taking this step at a time when Europe's priorities are changing in many places following the attack on Ukraine and the energy crisis?

In Europe, we currently have to replace Russian gas - also with coal, which is why we are considerate of consumers and industry. As the EU, we have not only committed ourselves to the 2030 targets, we have even tightened them in the areas of land use, forestry and emissions trading. From 2027, efforts will be increased again overall. Anyone who does not invest now will have to be prepared for a sharp wind in two or three years.

In the USA, the IRA now offers many incentives for investments that are necessary for the energy transition. But you have to distinguish between investments and reductions. Of course we need batteries, electromobility and climate-neutral steel production. But we also need guidelines for companies and member states or incentives for behavioral changes such as emissions trading. The Americans don't have that, there is only this investment package.

It's a tech package and relies on new batteries and hydrogen to work? It's not about reducing CO2 emissions apart from that?

Yes, the IRA is a very crude instrument. The investments that Joe Biden is making don't change at all whether people carpool, cycle more or do other things to reduce emissions. Therefore, in an ideal world, these incentives should be combined with regulation. Such approaches exist in Europe. Emissions trading specifies exactly how many certificates and thus tons of CO2 may still be emitted by 2030 and thus leverages all possible potential. And when it comes to saving money, people's creativity is endless. But overall, our system is too confusing and complicated.

They are two fundamentally different approaches, is that possible? The US says we have to develop these technologies first and is therefore pouring hundreds of billions into research with almost no cap. As soon as these technologies are up and running, we'll see what further reductions we need. Europe, on the other hand, is setting targets to reduce emissions, but isn't exactly sure how to do it.

Good point. As the Christian Democratic group in the EU Parliament, we support the EU Commission's "Fit for 55" package, but criticize the fact that many answers are missing. For example, we want to decarbonize the steel industry, but we don't know where the hydrogen will come from. And the financial resources that we in Europe are providing for this are difficult to understand. Applying is complicated, the IRA does that much better. But the IRA also contains a lot of "America first". European producers are not allowed to enter the American market, even if they make the better products. However, our answer should not be "Europe first" but - as one colleague put it - "Europe fast": we must speed up and streamline approval procedures, reduce bureaucracy and make funding easier. The EU Commission intends to present a proposal in mid-March.

So the IRA creates two problems: It attracts companies that say up front that we'd rather build our new factory in the US because we'll get more money there. In addition, European companies will find it more difficult to access the market. Correct?

Correct. In the worst case, certain technologies will no longer be produced in Europe, but only in the USA. In addition, there is the challenge, especially for us as an export nation, that we can continue to deliver our products to the USA. The Americans are actually excluding European companies even if they develop the better products. This means that climate protection is also becoming more expensive in the USA.

In retrospect, it was a big mistake that we didn't adopt the TTIP free trade agreement. Because Canada and Mexico can continue to deliver to the USA under IRA rules, which benefit from the law. not Europe. We have to fight for every step. That would not have happened with a free trade agreement. And if you compare our problems in China and Russia today with the TTIP problems... we were discussing chlorinated chickens back then!

Do you fear that jobs in Germany and Europe will actually be lost as a result of the IRA? Because many companies are of course happy to accept the offer and say: Dear EU, dear federal government, also give us billions in aid or we will build the next factory in the USA!

We have to be very careful and we mustn't rule that out. The German economy has an extremely high export share. If we were only allowed to live from what the German market has to offer in the future, we would be in pretty bad shape. As an export nation, we must ensure that we are also allowed to sell our products in the USA and other parts of the world.

But if you talk to the companies, they say that energy prices in the US are much lower and it's generally easier to invest. The shortage of skilled workers is also not that precarious there.

There are many people who would like to work in Germany and have already found an employer, but then the process takes a long time. It is almost easier to come to Germany illegally as an asylum seeker than legally as a skilled worker from a third country. That's perverted. We urgently need to change that.

Energy prices are also a huge challenge. A big reason why the US isn't affected and the gas is very cheap: They produce enough gas at home. But I don't think that's why we should get into fracking. Instead, we should continue to invest in renewable energy and energy efficiency. In business, I'm experiencing a complete change of mood on these issues. Five years ago, the chambers of industry and commerce scolded us for this, but now they can't move fast enough because they see that the unilateral reliance on Russian gas was a mistake. And in the long term, an economy with renewable energy and energy efficiency is cheaper anyway.

You sound like Claudia Kemfert right now.

That's correct. I'm not the only one with these ideas. Many politicians and scientists warned early on. It's not that everyone got it wrong. But now we are facing this challenge and have to step on the gas. However, in the case of wind power, for example, we are well on the way to amending European law in such a way that wind turbines can be fully approved within a year and not every single one needs an environmental impact assessment. We have to get better and faster there, also because of the costs.

Is this development due to the IRA or the war?

That was more like the war. With the Russian attack on Ukraine, it was clear that the cheap gas business model was over. But one positive aspect of the IRA is certainly that companies are now thinking about how they can develop green technologies and bring them to market as quickly as possible, because they know that someone else could be faster.

Politicians are also considering how best to react: we have a large number of existing funds in the EU. There is the innovation fund, which has been increased to more than 50 billion euros. With the current prices in emissions trading, it is almost 60 billion. We have managed to ensure that the Member States' income from emissions trading - that is EUR 450 billion - must be spent in a targeted manner. Then we still have around 250 billion in the Corona reconstruction fund. We have just decided on Repower, which also involves a considerable amount in the billions. And a third of the money from the structural funds is also to be spent on climate protection. In North Rhine-Westphalia alone, the decarbonization of steel at Thyssenkrupp is being funded with 700 million euros. We must never let that fall under the table. But these aids are confusing. You have to simplify that so that every company knows immediately: I have this offer from the USA. What does Europe offer me?

That sounds like healthy competition. Wouldn't that be wrong in terms of the climate, wouldn't it? Especially if you manage to develop a market together with the USA.

At least this US government shows goodwill. The dialogue is much better than in Donald Trump's day. The main problem is these protectionist tendencies and the basic mistake that we don't have a free trade agreement. Because we don't know who will be the next US President, much worse can still happen. But if we manage to solve these problems through intensive diplomacy, then there will also be long-term solutions.

Clara Pfeffer and Christian Herrmann spoke to Peter Liese. The conversation has been shortened and smoothed for better understanding.