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US green subsidies draw European angst

US Inflation Reduction Act will take cleantech investment away from Europe, EU says

by Alex Scott
January 26, 2023 | A version of this story appeared in Volume 101, Issue 4


Wacker's production complex in Charleston, Tennessee.
Credit: Wacker Chemie
US incentives “might make a difference” when it comes to capacity expansions, says Wacker, which operates a polysilicon plant at its site complex in Charleston, Tennessee.

European leaders are raising concerns that the Inflation Reduction Act (IRA), a US law that includes $369 billion in spending to combat climate change, will suck investor cash and cleantech start-ups out of Europe and to the US.

In her Jan. 17 speech at the World Economic Forum in Davos, Switzerland, European Commission President Ursula von der Leyen flagged the US funding package as a problem for Europe. “It is no secret that certain elements of the design of the Inflation Reduction Act raised a number of concerns in terms of some of the targeted incentives for companies,” she said.

Knowing ample federal cash is available, US states are said to be stepping up efforts to attract international cleantech companies.

The European Union’s own incentive package, part of its Green Deal policy, is not as generous as the IRA. “To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU,” von der Leyen said.

Attempting to close the gap with the US, the Commission intends to ease state aid rules on subsidies and accelerate its cleantech funding process, von der Leyen said. Technologies that she has in mind include the production and processing of lithium for electric vehicle batteries.

Such technology may already be heading out of Europe and into the US. “Our Giga America phased development is accelerating, catalyzed by the Inflation Reduction Act,” Tom Einar Jensen, CEO of the Norwegian lithium-ion battery start-up Freyr, said in a recent press release.

Wacker Chemie, a manufacturer of polysilicon—the key ingredient in photovoltaic panels—in both Germany and the US, says it is not considering shifting existing production capacity from Europe to the US because of the IRA. However, the US incentives on offer “might make a difference” when it comes to adding new capacity, the firm says.

Meanwhile, the Commission continues to release the funds now at its disposal. It recently granted $105 million to a consortium featuring the chemical maker Perstorp that wants to use carbon dioxide as a raw material for making methanol. The Commission also awarded the German energy firm RWE $118 million to help build FUREC, a $650 million project in the Netherlands to convert waste into green hydrogen.



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