News In Context

The U.S.’s IRA Is Enticing More European Companies To Set Up Shop In America

European Commission President Ursula von der Leyen’s planned trip to the White House this week to discuss the Inflation Reduction Act took on new urgency as news broke that Volkswagen is putting on hold a planned battery plant in eastern Europe and prioritizing a similar facility in North America after estimating it could receive €10 billion in U.S. incentives.

 VW’s enticement by the U.S. government is the latest fallout from the IRA, a $369 billion package of subsidies and tax incentives for green technology, that is luring European companies to the U.S., reported the Financial Times.

Enel, Solvay, EDP and Northvolt are among other European companies that have expressed an interest in benefiting from U.S. subsidies  and are therefore pressing ahead with expansion plans in the U.S. This could ultimately mean less innovation in Europe and fewer jobs for Europeans too.

 Europe’s largest carmaker told EU officials last week that it expected to reap €9 billion-€10 bilion in subsidies and loans from the IRA and other US schemes over the lifetime of the factory,  people at the meeting told the Financial Times. VW was “waiting” to see how the EU would respond to Washington’s incentives before pressing ahead with a plan to build a plant in eastern Europe, said one person quoted by the FT.

 The IRA has sparked concern among European policymakers as high-tech industries such as batteries, which they have spent years nurturing, look across the Atlantic as competition from China intensifies.  U.S. climate envoy John Kerry has argued that instead of expecting major concessions from the U.S., the EU and other partners need to take urgent steps to make their own green investment conditions more attractive.

The European Commission, which will next week publish a Net Zero Industry Act as part of its response to the US green scheme, is looking to loosen rules on state aid and is reassessing whether to deploy EU-level subsidies. But an early draft outlined last week has fallen short, according to industry executives interviewed by the Financial Times. “It looks pretty bad. There was an absence of concrete measures, “ a senior executive at another European battery maker present at last week’s meeting, which took place in Brussels, told the FT: The newspaper quoted another executive was quoted as saying “We’ve been contacted by many US states and they all highlight the IRA. When we put the figures together, the conditions they offer are much more interesting than the conditions they offer in Europe.”

VW said no decisions had been made on the locations of its plants in North America or Europe and it was committed to its plan to build more cell factories in Europe. “But for this we need the right framework conditions. That is why we wait and see what the so-called EU Green Deal will bring,” the company said.

Battery maker Northvolt, which also attended the meeting, suggested it could choose the US over Germany when deciding the location of its next gigafactory unless Brussels gave more concrete support, according to people quoted by the FT. Northvolt estimated it would be able to receive more than €8 billion in US subsidies for one factory, they said.

Companies in other sectors are wondering how the IRA will impact them.

As previously reported Marvel Fusion, one of the few European start-ups trying to deliver zero-carbon fusion power, is being pushed by investors to move to the U.S. as American officials attempt to lure clean-energy businesses across the Atlantic.

The agricultural sector could also be impacted as pressure mounts to apply green technologies to modern forms of farming.  Global Agrifood Tech Alliance, (GATA) held a webinar this week to discuss the topic.

“Companies can only benefit from the IRA subsidies if you are located or producing on North American soil. “How can EU and other countries respond to that to ensure a thriving green tech industry?,” asked Joanna Gordon, the head of the alliance.

 Andre Loesekrug-Pietri, Chairman of the Joint European Disruption initiative (JEDI), who participated in the GATA webinar said the U.S.’s plans were detailed in U.S. President Joe Biden’s Build Back Better plan three years ago.  The writing was on the wall, he said, so the “the fact that they were surprised is a real political failure on the part of Brussels and the European capitals.”

Europe had an open runway for two decades on clean tech, noted Loesekrug-Pietri.  He says officials are frustrated because the U.S. did what they asked it to do – become more active on climate change – but they did it in a simple, straight forward way that did not “forget their own interest.” He criticized the EU for moving too slowly and creating schemes that are far too complex.

VW is making “much faster progress” with battery factory plans in North America compared with Europe, Thomas Schmall, head of VW’s components unit, wrote on LinkedIn after attending the meeting in Brussels. Europe was at risk of losing out on “billions of investments that will be decided in the coming months and years”, he added, calling for a European public state aid program and lower prices for green energy.

 Arno Antlitz, VW’s chief financial officer, last week said the carmaker “would have done [a North American battery plant] anyway”, but that the new subsidies accelerated its plans. “The IRA gives us a tailwind in terms of speed and consequence, so we have the possibility to enlarge our global footprint even faster in the US with the IRA,” he said.


China to Set Up New Financial Regulator, New Data Bureau, And Restructure Science And Technology Ministry

China will set up a new financial regulatory body consolidating oversight, which analysts said was aimed at closing loopholes with multiple agencies monitoring different aspects of trillions of dollars’ worth of its financial services industry.The government will also set up a bureau responsible for coordinating the sharing and development of data resources, according to a plan submitted to parliament on March 7.

 The setting up of the new financial regulatory body comes as Beijing seeks to rein in large corporate and financial institutions that may bring systemic risks via regulatory arbitrage among multiple authorities.In the last couple of years, a string of private enterprises in China, including fintech giant Ant Group, have come under scrutiny of multiple watchdogs after years of laissez-faire regulatory approach.

The proposed data bureau will be run by the powerful state planner, the National Development and Reform Commission (NDRC), and absorb some of the functions of the Office of the Central Cyberspace Affairs Commission, which oversees China’s internet.

The new bureau’s functions will include the exchange of information resources across industries and promoting smart cities. China has in recent years strengthened oversight over data, concerned that unchecked collection by private firms could allow rival state actors to weaponise information on infrastructure and other national interests, and the belief that data has become a strategic economic resource.

Beijing will also restructure its science and technology ministry to concentrate resources on achieving breakthroughs, amid U.S. efforts to block Chinese access to key technology. It will also form a Central Commission on Science and Technology, increasing Communist Party control in the field.

Axa Investment Registers As Crypto Service Provider In France

French market regulator AMF said Axa Investment Managers had registered as a crypto service provider in the country, joining a list of several financial firms getting regulatory approvals to avoid service disruption in France. Binance, Bitstamp, and Societe Generale have already registered to be crypto service providers in France. The European Union (EU) deemed last year that cryptocurrency companies will need a license and customer safeguards to issue and sell digital tokens in the EU.

About the author

Jennifer L. Schenker

Jennifer L. Schenker, an award-winning journalist, has been covering the global tech industry from Europe since 1985, working full-time, at various points in her career for the Wall Street Journal Europe, Time Magazine, International Herald Tribune, Red Herring and BusinessWeek. She is currently the editor-in-chief of The Innovator, an English-language global publication about the digital transformation of business. Jennifer was voted one of the 50 most inspiring women in technology in Europe in 2015 and 2016 and was named by Forbes Magazine in 2018 as one of the 30 women leaders disrupting tech in France. She has been a World Economic Forum Tech Pioneers judge for 20 years. She lives in Paris and has dual U.S. and French citizenship.