The Inflation Reduction Act and the EU – The Need to Strengthen the Transatlantic Trade Relationship

Hellmich, Mary; and Sarah Jackson 2022: The Inflation Reduction Act and the EU. The Need to Strengthen the Transatlantic Trade Relationship. Berlin: adelphi/E3G.

The Inflation Reduction Act (IRA) puts the US on track to achieving its 2030 Nationally Determined Contribution under the Paris Agreement. EU leaders, like Commission President Ursula von der Leyen, welcomed the IRA’s final passage and the US living up to its climate promises. But now, the EU, including several member states, have raised concerns over certain provisions that may benefit US producers over foreign ones.

This briefing seeks to explain the political economy dynamics behind both the passage of the Inflation Reduction Act and the European response. As the green transition reaches the implementation phase, trade conflicts are likely to continue, especially as countries try to maximise their share of new clean energy markets. This briefing outlines the challenges facing the transatlantic partnership and what is at stake if the disagreement over the IRA is not resolved.