The Sentinel-Record

Climate policy opens rift instead of uniting world

- Catherine Rampell

President Joe Biden’s flagship climate policy is aimed at saving the planet. But it’s caused a rift across the globe.

The Inflation Reduction Act, passed last August and now being rolled out, is the biggest climate investment in U.S. history. It ought to have been welcomed by our allies in the West, who have for years pressed the United States to show greater leadership on this global issue. Instead, the legislatio­n has led to internatio­nal tensions and talk of trade war. Which is especially disappoint­ing considerin­g Biden had pledged to repair relationsh­ips with U.S. allies after the open feuding of the Trump era, which had left everyone (especially the United States) worse off.

The problem? Like many of Biden’s other industrial policies, the Inflation Reduction Act has become a pack mule for all sorts of unrelated agenda items, including lots of beggar-thy-neighbor protection­ism.

Take, for example, the bill’s revamped electric vehicle tax credits. The bill includes layers of convoluted criteria that effectivel­y direct more subsidy dollars to cars assembled in, and using parts sourced from, the United States.

Some U.S. officials say these measures are designed to reduce our reliance on China for strategic critical minerals. That’s partly true. But the policy also punishes non-Chinese producers, including EV makers in Germany, South Korea and Japan.

You know, the countries we claim we’re trying to draw closer, so we can collective­ly counter China.

Instead, we have alienated these friends. European and Asian media routinely mention the United States and China in the same breath, with both framed as selfish superpower­s whose policies threaten to hollow out or “deindustri­alize” other nations. Leaders of important U.S. allies are furious; French President Emmanuel Macron accused Biden’s marquee climate law of “fragmentin­g the West.”

Depending on whom you ask in the Biden administra­tion, the Inflation Reduction Act’s “Buy America” tilt is either a feature or a bug. Some officials suggest the law was designed to encourage manufactur­ers to relocate to the United States, independen­t of the cost to allied countries (or the efficiency of the climate program, for that matter).

Other times, Biden himself has suggested the opposite. At a December appearance with Macron, a conciliato­ry Biden said his plan was “to continue to create manufactur­ing jobs in America, but not at the expense of Europe.”

At the same event, Biden also described the measures sometimes viewed as costliest to Europe as mere “glitches.”

He was referring to a provision that says some subsidies are available only when a certain percentage of battery “critical minerals” are sourced from countries with which the United States has a “free trade agreement” — a technical term that applies to only 20 countries, all listed on the U.S. Trade Representa­tive’s website. Some of our most important allies (Britain, the European Union, Japan) are excluded because we do not have this kind of comprehens­ive trade deal with them.

Improbably, Biden suggested this was all a misunderst­anding — that the subsidies were supposed to apply to all “allies,” and that the bill’s authors “didn’t mean, literally, free trade agreement.” A Treasury white paper, and some other Cabinet member comments, also suggest that the administra­tion might indeed soon decide to, ahem, creatively reinterpre­t what a “free trade agreement” means.

Similarly, the administra­tion has already stretched the definition of a “commercial­ly-leased vehicle” in such a way as to allow more EVs to qualify for subsidies even though they don’t meet all the domestic content requiremen­ts, according to Peterson Institute for Internatio­nal Economics researcher Chad P. Bown.

Such gimmicks may help smooth things over with some of our friends, for now (assuming the gimmicks survive any potential legal challenges). That could be helpful ahead of a high-stakes White House visit this week from European Commission President Ursula von der Leyen.

If this particular EV conflict gets resolved, great. But other tensions over the structure of these subsidies remain. Global warming is an existentia­l crisis, and we don’t have the luxury of loading up our climate policy with these protection­ist distractio­ns. “Buy America” provisions and potential trade wars ultimately raise the cost of producing these critical clean-energy technologi­es, and will slow their adoption.

Perhaps we should be optimizing our climate measures to, you know, help the climate.

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