13 This has roiled several trade partners, including the European Union, Britain, Canada and South Korea. Critics say it is protectionist, damaging for foreign manufacturers which could become uncompetitive on US markets, detrimental to global supply chains, and contrary to the rules of the World Trade Organization (WTO). “It is going to exclude some foreign producers from these kinds of subsidies, or favor relocation of producers to the United States in order to get the benefits of these subsidies. This is clearly inconsistent with WTO rules, and it may induce trade retaliations,” said Carraro, who is also Vice Chair of Working Group III at the Intergovernmental Panel on Climate Change (IPCC). Alongside the potential adverse effects for trade and competition that could lead to further restrictions and disputes, the subsidies may have a positive effect for the climate transition, by lowering prices for key technologies. “These subsidies reduce the price of these technologies and by reducing the price they help spread the technologies around the world” Carraro explained. Faced with this international scenario, the EU unveiled its Green Deal Industrial Plan this year, including the Net-Zero Industry Act (NZIA), which aims to support industrial manufacturing capacity and strategic and multi-country projects through fast-track permitting and developing European standards. It is designed in particular to boost EU capacity for netzero technologies such as solar photovoltaic and solar thermal power, heat pumps and geothermal energy, batteries and storage, and onshore and offshore wind power. This can help prevent the bloc from becoming more reliant on third countries such as China. INSIGHT | Going Green and Digital “The focus in the Net-Zero Industry Act is on fast permitting, but not only this; there are net-zero strategic projects, there are projects to attract new investments into these technologies, and the netzero industry academies to get the skills,” he said. The funding structure differs for the NZIA, with most of it to come from existing EU programs such as RePower EU, the Recovery and Resilience Facility, InvestEU and the Innovation Fund. Carraro said the EU was taking the right approach by focusing on its structural competitiveness and that it should not introduce local content requirements of its own, or loosen state-aid rules, or copy the IRA’s approach to manufacturing subsidies. In particular, he said the EU should adopt specific measures in favor of clean technologies. These include better regulation, green procurement rules and EU-level financing supporting new or early-stage clean-tech areas in which EU firms have the potential for sustainable competitive positions. Additionally, he suggested the EU should continue negotiating with the US administration to obtain an exemption from IRA local content requirements, and possibly launch WTO proceedings to obtain redress. “Diffusion of clean technology is important, and both the Inflation Reduction Act and the European Net-Zero Industry Act are aiming at targeting this important objective.” “We should focus on our own capacity to do better than the others and to be faster than the others and develop better technologies.”
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