EU says it has serious concerns about Biden’s Inflation Reduction Act

BRUSSELS — The European Union has “serious concerns” about the U.S. Inflation Reduction Act, saying it breaches international trade rules, according to an official document seen by CNBC.

The sweeping tax, health and climate bill was approved by U.S. lawmakers back in August and includes a record $369 billion in spending on climate and energy policies. The landmark package comprise tax credits for electric cars made in North America and supports U.S. battery supply chains.

European officials have acknowledged the green ambitions associated with the package, but they are worried about “the way that the financial incentives under the Act are designed,” the document, which will be presented to U.S. officials, says. The EU listed nine of the tax credit provisions that it has an issue with.

This is not the first time that Europe has voiced its concerns over the policy. The EU’s competition chief, Margrethe Vestager, said last month that “as a matter of principle, you should not put this up against friends,” as reported by the Financial Times.

In essence, the EU is worried about potential new trade barriers on European electric vehicle producers. And they are not the only ones, South Korea, for instance, has also brought up the same concern.

Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said Monday that countries need to be “very careful that whatever policies are taking should not be discriminatory, should not favour domestic goods.”

Speaking to CNBC’s Dan Murphy at the COP27 in Egypt, she recognized that some nations feel the “subsidies that are being given for the electric vehicles may be discriminatory against their own electric vehicle production.”