'Good Policy' For EU To Match US Green Plan With Own Subsidies: Yellen

ADDS background, Yellen quotes

US Treasury Secretary Janet Yellen on Wednesday encouraged the idea of green subsidies by the European Union to offset feared harm from a vast US climate plan — arguing there is enough business for all to benefit from the clean energy transition.

Her comments came a day after talks with French economy minister Bruno Le Maire and his German counterpart Robert Habeck, who visited Washington to discuss the impact of the Inflation Reduction Act (IRA) on European industry.

While the United States is keen to reduce dependence on Chinese imports, the EU is concerned about collateral damage if companies are enticed by US subsidies to relocate outside the bloc.

“If Europe takes action to put in place subsidies similar to ours, this is good climate policy,” Yellen told reporters. “We’re going to work with them.”

The Treasury secretary was speaking at the site of a future Ultium Cells battery plant in Tennessee, as the United States puts into action President Joe Biden’s ambitious climate action plan.

The IRA includes $370 billion that goes towards reducing greenhouse gas emissions, with some investments in the form of tax cuts for companies that invest in clean energy, along with subsidies for electric vehicles, batteries and renewable energy projects — if they are US-made.

To head off the threat, the EU last week unveiled proposals such as a relaxation of state aid rules to level the playing field.

“We share very much the same objectives, Europe and the United States,” Yellen said Wednesday.

“We want to make sure that we have adequate supplies of all the things that are critical for clean energy, from batteries to solar panels, to wind turbines,” she added.

“Right now… we’re way too dependent on China,” she said.

With China producing 70 percent of batteries for electric vehicles, the IRA’s incentives for battery manufacturing are aimed at helping the United States grow its domestic clean energy economy, according to the Treasury.

“What we want is to make sure that we have alliances that are strong in the case of minerals,” Yellen said.

On Tuesday after the meetings, German minister Habeck also raised the potential for a “critical minerals club” which could help improve market access.

Asked about plans to visit China, Yellen said she still hopes to have a trip, although a visit by Secretary of State Antony Blinken was postponed over a suspected Chinese surveillance balloon floating over the United States.

“I do think improved communication is important,” she said, but added that the timing of her visit is uncertain and in part dependent on the State Department.