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US and EU to launch new talks on critical minerals trade in green tech race

US and EU officials will launch new talks on trade in critical minerals as Ursula von der Leyen visits the White House on Friday, in a move EU officials hope will boost its companies’ access to America’s green subsidies. 

US officials said the talks would help the two sides build secure supply chains for electric vehicle batteries. In turn, EU officials hope a deal will make its supplies of raw and processed critical minerals eligible for generous US subsidies under Biden’s flagship climate legislation.

The US Inflation Reduction Act — which aims to help the world’s largest historical polluter reduce greenhouse gas emissions to half their 2005 levels by 2030 — provides tax credits for groups that source parts and materials from countries with which the US has a free trade agreement. That excludes the EU and Japan, which lack such deals with the US.

Last week, an EU official said the hope was that a loose deal around critical minerals with Washington could be given “free trade like status” and allow products from Europe to qualify for the subsidies. The official said a fuller deal would need to be legally binding on both sides but could be carried out using executive powers in the US. 

US officials said on Thursday that any fuller agreement would probably include “extremely high standards” on labour and the environment.

More than $90bn in green investment has poured into the US since last year’s passage of the IRA, which includes $369bn worth of tax credits, grants and loans to boost renewable energy and slash emissions.

The two sides also plan to launch a “dialogue” to boost transparency around subsidies for clean energy, within days of the EU unveiling new measures allowing member states to “match” multibillion-dollar incentives as they fight to keep projects in Europe. 

Last month French economy minister Bruno Le Maire and his German counterpart Robert Habeck visited Washington to convey European concerns that the US’s legislation could usher in a subsidy war.

Le Maire said French, German and US officials had agreed on the need for “full transparency about the level of subsidies and tax credits” awarded to private companies, as well as the need for “constant communication at the ministerial level” about strategic investments on both sides of the Atlantic.

On Thursday evening, a US official said the “goal” of launching an official channel was to make sure Washington and Brussels “were communicating with one another . . . to maximise the deployment of clean energy over time and so that those incentives do not compete with one another”. 

Communication would reduce the chances of “a zero sum competition that lines the pockets of private interests”, the official added.

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