European Competitiveness: Lessons from the IRA

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European Competitiveness: Lessons from the IRA

Author

Georgina Wright

Resident Senior Fellow and Deputy Director for International Studies

Georgina Wright is Senior Fellow and Deputy Director for International Studies at Institut Montaigne.

Énora Morin

Project Officer - Europe program

Énora Morin has been coordinator of the Europe program since September 2024.

The Inflation Reduction Act (IRA), passed in August 2022, marked a pivotal shift in U.S. industrial policy. Two years later, Donald Trump comes back to power and seeks to reverse Biden’s green agenda-dismantling key provisions of the IRA and prioritizing fossil fuels. To improve its own competitiveness, what lessons can the EU draw from the IRA’s approach to reindustrialization?

The IRA produced tangible results because it was high-scale and because its subsidies were rapidly and easily accessible. The IRA was much more than just a climate law. While it aimed to cut carbon emissions, it also sought to reduce dependence on foreign supply chains to counter China’s dominance and drive growth in domestic manufacturing. While fully dismantling the IRA would be legally challenging and politically complex, the Trump administration is already taking measures in that direction, and has a completely different approach of energy and industrial competitiveness.

This paper lays out some possible evolutions of the IRA framework under the second Trump administration, and offers ideas for Europe. While the EU should not seek to replicate the IRA, it should enhance its funding mechanisms for cleantech, accelerate permitting processes, streamline national-level tax credit approvals, ensure more effective subsidy distribution and guarantee both supply and demand-side incentives. The IRA also suggests that a "made in Europe" approach is likely to produce more results than a "made by Europe" one. Finally, the EU can do even more to ensure investor confidence by enhancing the pre- dictability of its regulatory framework.

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Extraterritoriality:
a Blind Spot in the EU's Economic Security Strategy

European competitiveness is under threat. Demographic and digital trends are transforming European societies and economies. Inflation is high and politics are more fractured. The US-China tech rivalry is intensifying and companies are feeling the squeeze. European governments, like countries around the world, are under intense pressure to safeguard their interests. Many are turning to law to achieve this.

Read the Issue Paper