IRA vs Repower EU: the great divergence

Amid mounting climate change emergency, the level of industrial competition is rising among regional blocks for the development of new, low-carbon technologies from R&D to full commercial deployment. These technologies (low-carbon electricity and hydrogen-based solutions) are being developed with a view to decarbonizing sizeable segments of the transport and industry sectors.

The rationale behind public support to these technologies is twofold: progress towards climate neutrality by 2050, but also develop a new, competitive manufacturing base aligned with the features and imperatives of the energy transition. 

The Inflation Reduction Act (IRA) recently enacted by the Biden administrative features a massive stimulus to investments in low-carbon technologies in the United States. The massive amounts of federal spending underlying the plan ($369bn) as well as its simplicity are in stark contrast with the overaching yet complex nature of the support mechanisms in place or in the making in the European Union through the RepowerEU and Fit for 55 energy and climate packages. Since its enactment, the IRA has fueled fears of an “industrial leakage” in Europe ultimately benefitting the United States. 

The purpose of the webinar organized last Thursday February 2, 2023, featuring Natixis CIB’s energy experts Yash Anand and Ivan Pavlovic, was to compare support mechanisms to the energy transition on both sides of the Atlantic from the point of view of prospective investors but also to discuss how the European Union is likely to respond to the IRA.



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