The European Union must find more funds to assist its own industries in the green transition if they are not to suffer from the US’ large aid package, the Inflation Reduction Act (IRA), which promotes domestic producers with its support for the transition to green energy.

This is the message from Paolo Gentiloni, European Commissioner for Economy, in an interview with the Financial Times.

The need is not urgent, as the EU already has ample funds ready until 2026, including the EUR 800bn set aside for investments in the recovery of the economies after the pandemic. However, after next year’s European Parliament elections, more funds will be needed.

”You have a global race, and in this global race economic support from the public is part of the race – regulation is not enough,” says Gentiloni.

”The pull factor of the IRA is increasing.”

The Inflation Reduction Act provides hundreds of billions of dollars in subsidies and tax cuts for renewable energy investments in the US, including the construction of local generation capacity, and the EU has repeatedly warned that the package passed last summer is protectionist.

The Congressional Budget Office initially estimated that the Inflation Reduction Act would cost the US government USD 391bn, but Goldman Sachs has since estimated that the amount could exceed USD 1trn.

According to Gentiloni, the focus should not only be on the fact that the investments will improve the climate, but also on the situation of households.

”Your family will have advantages. Your children will find better jobs. And if we are late movers the better jobs will be taken by someone else.”