France Fights Back Against US With Aid for Green Transition

(Bloomberg) -- The French government presented a green industry bill including tax credits and targeted bonuses for electric vehicles, seeking to rival US support for its businesses in the shift to an economy with lower-carbon emissions. 

It is “urgent” to respond to the Inflation Reduction Act as more than half of global industrial investment is concentrated in the US, the government said in a presentation of the measures that also include tougher climate criteria in public procurement and speeding up procedures to open new factories.

“After Covid, there is a new, more brutal form of globalization in which everyone defends their own interests with few scruples, and the US and China are in a merciless technological, economic and financial rivalry,” Finance Minister Bruno Le Maire said. “Europe can find a place in this new globalization.” 

Le Maire first presented the plans for the green industry measure at the start of this year as governments around Europe sought a response to President Joe Biden’s climate bill and its promise of $369 billion in handouts and tax credits in the next decade. 

The European Union has said that aspects of the US bill would unfairly discriminate against European companies and is seeking an exemption for European firms. Brussels is still working to figure out to what the extent the legislation will impact the bloc’s economy.

Le Maire said France will be the first to use new tax credits and temporary exemptions from EU rules. Combined with existing grants and new sources of private financing, the total envelope of support for industry is comparable to what the US is providing, he said. 

“We shouldn’t blush in comparison with the US — if every state in EU with such determination, the figures are comparable,” Le Maire said. “It’s a knife fight between China, US and Europe and nobody is giving any gifts.”

The use of tax credits for investment in solar, wind power, batteries and heat pumps will generate around €23 billion of investment and 40,000 jobs in France between now and 2030, the finance ministry estimates. 

The around €500 million a year cost of the new credits will be financed by raising penalties for gas-guzzling vehicles and cutting tax subsidies to polluting activities in next year’s budget. Those measures will be defined later this year.

The finance ministry also gave more details on how the government plans to change bonuses for electric vehicles, a move President Emmanuel Macron has said would favor cars made in Europe. New criteria for the French bonuses between €5,000 and €7,000 will focus on the energy mix of the country where cars are assembled, the carbon footprint of parts, and the share of elements that are and could be recycled.

Le Maire said around 40% of the €1.2 billion annual cost of the existing bonus scheme ended up financing output in Asia, while the production of a car in European emits around 45% less carbon. 

“It’s not our job to finance the development of factories in Asia with public money,” Le Maire said. 

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