Biden May Give European Automakers US Tax Credits for Battery, Critical Mineral Production

The United States and European Union will negotiate a revised Trade Agreement that could enable European manufacturers to get tax credits from the United States for producing vital minerals, such as nickel and lithium for electric cars.

Following a March 10th meeting at the White House between President Joe Biden & President Ursula von der Leyen of the European Commission, the leaders agreed on the intial talks. “Made in America” Provision in the Inflation Reduction Act, which the EU maintains, is “protectionist” This is a major obstacle to releasing ourselves from Russian oil and gas dependence.

Biden and von der Leyen refused to answer any questions, but did issue a statement. Joint statement That reads: “The United States and the European Union are taking new steps to deepen our economic relationship as we build the clean energy economies of the future and address shared economic and national security challenges.”

Leaders made a shared commitment “addressing the climate crisis, accelerating the global clean energy economy, and building resilient, secure, and diversified clean energy supply chains” This is causing a review of IRA “Made in America” policy.

“By building and strengthening our own clean energy industrial bases and investing in the industries of the future, the United States and the European Union will create good-paying jobs and spark virtuous cycles of innovation that drive down costs for clean energy technologies in the global market, making those technologies more affordable and advancing a global just energy transition that will leave no community behind,” The joint statement is as follows:

Von der Leyen spearheaded an eight-member delegation during the Oval Office meeting that included EU ambassador to the United States Stavros Lambrinidis, trade advisor Tomas Baert, and head of political, security, and development of the EU’s U.S. delegation Claire Fitzgibbon.

Biden was not the only official to attend the meeting. Secretary of State Antony Blinken (Secretary of the Treasury Janet Yellen) and Jake Sullivan, national security advisor, were also there.

Critical Minerals Gap

China dominates the global supply of minerals for electric vehicle batteries. However, battery manufacturing is also dominated by South Korean and Japanese companies.

According to the EU, the market for electric vehicles batteries could reach $282 billion annually by 2025.

America, Europe and Britain are all launching ambitious plans for securing their critical mineral supply lines. Biden, von der Leyen and others stated that they will intensify coordination.

“We will deepen our cooperation on diversifying critical mineral and battery supply chains, recognizing the substantial opportunities on both sides of the Atlantic to build out these supply chains in a strong, secure, and resilient manner,” The joint statement is as follows: “To that end, we intend to immediately begin negotiations on a targeted critical minerals agreement for the purpose of enabling relevant critical minerals extracted or processed in the European Union to count toward requirements” For IRA tax credit

“This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted, and free of labor abuses,” Biden and von der Leyen said. “Cooperation is also necessary to reduce unwanted strategic dependencies in these supply chains, and to ensure that they are diversified and developed with trusted partners.”

Automakers want an EU IRA

Allowing European manufacturers to qualify for the tax credit is a recommendation from the U.S.–EU Task Force on Europe’s Energy Security, established in the wake of Russia’s February 2022 invasion of Ukraine to reduce dependence on Russian oil. The U.S. Senate Natural Resources Committee Chair Senator Joe Manchin (R.W.Va.) has apparently endorsed it.).

An IRA provision, which was adopted in November 2021, provides tax credits for electric cars if a certain percentage of the source material for the batteries comes from North America, or countries with whom the United States has a Free Trade Agreement. The United States of America and the European Union don’t have a trade pact.

Battery cell manufacturers can be eligible under the IRA for an “advanced manufacturing production credit” Manufacturers could receive incentives worth millions of dollars by investing $35 per kilowatthour of annual capacity.

Manufacturers are demanding that the EU adopt their own version of the IRA. The EU claims that member countries are being punished. Although several EU member countries offer large subsidies to carmakers and battery firms to attract investment, neither the United States nor Europe want to become involved in a. “subsidy war.”

Von der Leyen spoke out about the United States, EU and other countries during a speech at the World Economic Forum in Davos (Switzerland) in January. “like-minded partners” Should be in writing “a critical raw materials club” To reduce our dependence on communist China which had dominated the supply chain for strategic/critical minerals from mine to market.

Von der Leyen praised IRA before he joined Biden in Oval Office. “great that there is such a massive investment in new and clean technologies.” She added that the EU’s “Green Deal Investment Plan” It should be matched.

European carmakers, including Volkswagen, are putting pressure on Europe. They have warned Europe that Europe is in danger of falling behind in the development of gigafactories. The IRA has nearly $370 Billion in tax credits.

Volkswagen, chemicals company Umicore, and battery producer Northvolt met with EU officials and EU’s European Battery Alliance in early March to urge it to speed up permitting and create—as von der Leyen alluded to—an “IRA matching clause.”

According to the Financial Times the automaker is seeking a response from EU officials before it decides to invest in eastern European plants. Volkswagen intends to build six European batteries factories. Two of the first two factories, located in Salzgitter, Germany and Valencia, Spain will start production by 2026.

“Today, the battery business is led by Asian companies. And while the United States are catching up thanks to the Inflation Reduction Act, Europe is more and more lagging behind,” Thomas Schmall, Chairman of Volkswagen Group Components Board of Management wrote in a post on social media. “The conditions of the IRA are so attractive that Europe risks to lose the race for billions of investments that will be decided in the coming months and years.”

Biden’s administration has also been in contact with Japan and the UK to expand the IRA tax credit for their manufacturers.

Biden must balance concerns of European allies about the provisions with objections by congressional representatives who praised IRA’s. “Made-in-America” tax credit It was, in fact, the only thing that the mammoth bill had that Republicans could agree on.

Ukraine Resolve Reiterated

Biden and von der Leyen both pledged to continue support for Ukraine against the Russian President Vladimir Putin’s invasion. In November von der Leyen announced the establishment by the EU of an International Criminal Tribunal for the Russian Federation.

Von der Leyen was the European Commission president from December 2019 to serve as secretary of defense under Angela Merkel in the German federal government.

“We are partners jointly supporting together Ukraine that fights for freedom and independence. We are making Russia pay for its atrocious war,” Before the meeting, she spoke out to reporters. “We’re strongly aligned, defending our values.”

Von der Leyen thanked America for supporting Western Europe in its quest to eradicate Russian fossil fuel dependence. “You helped us tremendously by delivering more LNG—you helped us through the energy crisis.”

These leaders discussed how to enforce sanctions against Russia, third-party countries supporting the invasion, and China. China is also rumored to be considering providing lethal support to Russia.

“We, along with a broad coalition of partners, have imposed swift and sweeping sanctions that are reducing Russia’s revenue to fund its war and its military-industrial base,” The joint statement is as follows: “Putin thought that he would divide us, and yet we are more united than ever. We stand together in our unwavering support for Ukraine for as long as it takes.”

Biden and von der Leyen talked about the evolving concern and other threats posed by China’s ruling communist Party, CCP. However, they didn’t address these concerns in the joint declaration.

Biden and Von der Leyen met for the first time in November 2022 at Bali’s G-20. This was her first trip since November 2021, when she visited Washington.

“It’s a pleasure to be here, to be back again. It’s good to come back here because we are not only partners—the European Union and the United States are good friends,” She spoke. “This could be felt through all of the work that we’re doing together.”