EU shrugs off Trump’s threats to scrap green handouts

BRUSSELS — We’ll survive. 

That’s the general feeling among the European Union’s green businesses as they prepare for Donald Trump’s potential return to power — despite the former president vowing to turn off the taps for any climate-friendly firms currently benefiting from Washington’s mammoth green subsidies.

Trump has repeatedly railed against the Inflation Reduction Act (IRA) — President Joe Biden’s landmark $468 billion plan to turbocharge investment in green technologies — and promised to block any more funds from the package being spent.

But that won’t have much impact on the EU, experts and industry figures argue. To start, they simply don’t believe Trump will actually repeal the signature law if elected — practically speaking, it’s adding manufacturing jobs in red states.

Even if Trump excludes the EU from the IRA’s green goodies, well, Europe isn’t drawing many benefits, anyway. And a full repeal might even help European governments struggling to match America’s subsidy splurge. Essentially, the global cleantech race will continue regardless.

“I just don’t think there’s any chance of it being completely repealed,” said Antoine Vagneur-Jones, a senior analyst at BloombergNEF specializing in the climate-friendly industries dubbed cleantech. “It’ll be very hard for [Trump] to flick a switch and suddenly make it impossible for European companies to access those different incentives.”

Of course, the IRA is a small subset of Trump’s promised economic upheaval that could do more damage abroad. The tariff-lover has toyed with a levy on each product entering the United States. Would that push China to flood Europe with more cheap products — a practice already harming EU solar manufacturers? Would Europe’s nascent green tech companies suddenly lose a massive market? 

Still, green businesses insist they’re sanguine.

“Economically, it would not be a good idea to remove the IRA as it creates a lot of jobs,” said Walburga Hemetsberger, CEO of Brussels’ SolarPower Europe lobby. Either way, though, “it is a worry that is not our worry.”

“The European wind industry doesn’t tend to do trepidation,” added Giles Dickson, who heads the EU-wide WindEurope trade association. “We’re keeping an eye on it [but] you’ve got to remain level-headed about these things.”

Words or actions

When Biden first signed the IRA into law in 2022, it struck fear into European politicians, who worried its combination of generous tax breaks and subsidies would lure their prized companies over the Atlantic.

While those concerns have appeared overstated, Trump has boasted that he would reverse course. 

“My plan will terminate the Green New Deal, which I call the Green New Scam,” the former reality TV host said in September. “It actually sets us back, as opposed to moves us forward. And [I will] rescind all unspent funds under the misnamed Inflation Reduction Act.”

That could mean some change in policy, according to George David Banks, Trump’s former top international energy adviser, especially depending on who he appoints to run the U.S. Treasury. He singled out Robert Lighthizer, Trump’s former hawkish trade adviser.

“I could see a Lighthizer-led Treasury Department using all of the tools at its disposal, including tax credits, to leverage against the Europeans and others in foreign economic negotiations,” Banks said. 

That could affect IRA clauses that benefit EU firms, he said, including one that gives Americans a major tax break if they lease a foreign electric vehicle. It could also impact talks on a U.S.-EU pact on critical raw materials that would further expand Europe’s access to IRA-related credits, he added. 

Still, a more substantive repeal is unlikely, according to Dan Mullaney, a former assistant U.S. trade representative for Europe who now works at the Atlantic Council think tank.

“I don’t think that there’s going to be any rush to get rid of a program that has obviously encouraged manufacturing in the United States,” he said. “Whoever succeeds in the election will want to preserve and expand that approach, too.” 

At the same time, Trump won’t be able to overturn the program himself, said Joseph Majkut, director of the Climate Change Program at the Center for Strategic and International Studies. 

While the former president could “hold back unspent grant money,” he said, “that’s a much smaller amount of money” than the clean energy tax credits that require Congress’ approval.

That could be an obstacle whether Democrats win a majority in Congress or not since many of the cleantech investments announced so far are in Republican-controlled states — making it sensitive for lawmakers from both political parties.

Much of a muchness 

Even if Trump does succeed in scrapping the IRA, it wouldn’t scuttle too many existing projects.

That’s partly because EU firms so far have only a limited presence in the U.S., according to Vagneur-Jones, the analyst. As of 2023, only a quarter of announced new electric vehicle and wind investments came from EU firms, he said, a fifth for batteries and even less for solar. 

Even for electric vehicles — the core target of Trump’s ire — the impact of a reversal would “not [be] huge,” said Pedro Pacheco, an auto sector expert at the Gartner consultancy, since EU producers often sell above the price limit for accessing the most generous IRA credits.

More exposed are EU firms producing green hydrogen, a gas made from renewable energy that policymakers hope will help carbon-intensive industries cut emissions. For now, the majority of these companies have not yet begun U.S.-based production and thus aren’t benefiting from tax credits, said Jorgo Chatzimarkakis, CEO of Brussels’ HydrogenEurope lobby. But they had been eyeing America as a huge growth market.

If Washington backtracks on its hydrogen incentives, Chatzimarkakis argued production capacity could turn back to Europe while “the center of gravity” on investments shifts to the Middle East and India. That said, losing the U.S. market would slow the industry’s ability to scale up. 

That’s not the only problem facing the EU’s cleantech sector. Alongside persisting inflation pushing up supply chain costs, it is also grappling with a broader economic downturn facing the bloc.

“European growth outlook does not look good,” Erik Nielsen, group chief economics adviser at UniCredit Bank, wrote in a recent analysis.

“With the US economy presumably slowing and … with no realistic prospect of China recovering,” he added, “recent years’ driver of European growth — namely external demand — is petering out.” 

That’s created a palpable fear among the EU’s politicians. On Monday, France called for more incentives to ease purchases of EU electric vehicles made inside the bloc. 

Add to that the mounting fears that Trump could impose tariffs of 10 to 20 percent on all imported goods. 

“That’s basically the beginning of a trade war,” said one EU diplomat, granted anonymity to speak candidly. “In that case, the markets will shrink.” 

“How strong is the European internal market to survive that — I don’t know,” the diplomat added.

For now, though, climate-friendly industries are resolute. 

“Europe can survive Trump … whatever he does,” Chatzimarkakis said. “We’ll just look for new partners.”