The European Commission announced its Green Deal Industrial Plan on 1 February 2023 in response to the US Inflation Reduction Act (IRA). The plan is intended to enhance the competitiveness of Europe's net-zero industry and support the fast transition to climate neutrality. It will be based on four core pillars: a predictable and simplified regulatory environment, speeding up access to finance, enhancing skills, and open trade for resilient supply chains.
German Economy Minister Robert Habeck and French Minister for Economy, Finance, Industry and Digital Security Bruno Le Maire attended meetings in Washington, on February 7, 2023, to discuss the Green Deal and its implications.
The Green Deal plan is likely to be subject to fierce debate at the EU summit on Thursday and Friday. Major concerns include the debate over how to loosen rules on state aid without creating a new competition for subsidies between member states, and the potential of larger member states to subsidise their domestic industries to the detriment of players elsewhere in the EU.
The market response to the Green Deal Industrial Plan has been tepid, as analysts note that the funds are largely repurposed from other schemes. Key beneficiaries of the plan are said to include Vestas Wind Systems, Nel, ITM Power, RWE, Orsted, Umicore, BASF, Air Liquide, Evonik, and Johnson Matthey.
Thematic sectors such as EVs, solar, hydrogen and energy storage have responded differently to the plan. Musk's victory against a shareholder lawsuit and the U.S. Treasury Department's classifying the Model Y as an SUV (which allows for more tax incentives) resulted in Tesla's stock increasing for the week. Solar stocks are lower, led by U.S. residential names as analysts note a slowdown in demand. Hydrogen is lagging following a strong start to the year.
Debate surrounding the EU green deal continues, as some members are unhappy with the push from France and Germany as the measures are believed to favor the two countries. Meanwhile, the EU internal market commissioner has criticized the plan, suggesting a constant changing of state aid rules will confuse businesses.
Overall, the Green Deal Industrial Plan has created a full-fledged subsidy war between the United States and the European Union, and both sides will lose.
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