Saturday, February 4, 2023

Analysis | Why should we support car subsidy?

Macron, Scholz and Ursula von der Leyen are preparing to open the Grant Gate in their bid to protect Europe’s budding cleantech industry.

We would have preferred billions of taxpayer funds to be spent on renovating housing, developing public transport or helping low-income Europeans to transition from fossil fuels. Battery and electric vehicles will soon be able to compete with diesel and gasoline without any subsidies.

However, America has left Europe with no choice. The US Inflation Reduction Act (IRA) is the most aggressive industrial policy in decades. No matter what Biden and his team say, the IRA is a policy in its truest style america first ,america first) and could cause real damage in Europe.

Credit Suisse estimates that the IRA law will support electric vehicles (EVs) and batteries by $152 billion over the next 10 years. The law distributes tax credits that cover a third of the battery cost, while the direct subsidy amounts to $45/kWh, compared to $138/kWh for the cost of electric vehicle batteries. Also included are other subsidies for clean energy, raw materials and cathodes.

The IRA law comes just as Europe reached an unprecedented agreement to phase out combustion engine vehicles by 2035. The decision means that Europe will become a major consumer market for vehicles, electrical and batteries. And to meet growing community demand, there are plans to build some 50 gigabattery factories in Europe.

But all this is now in danger. Unless we act decisively, new gigabattery factories will be built in America instead of Europe like other cleantech factories. Instead of becoming 100% self-sufficient, the EU could import all its batteries, as well as many of its electric vehicles, from China and the US.

But this is clearly unacceptable. Decarbonization should not lead to deindustrialization. The EU has to answer. What should I do?

The Green Fast Track

The EU response must be well targeted. Funding should be limited to clean technologies affected by the IRA, ie batteries, wind and solar power, green hydrogen or heat pumps. Not a single euro should be spent to finance polluting activities (such as paying companies’ fossil energy bills), and no money should be drawn from the existing Green Fund.

The power of IRAs lies not only in the amount of grants but also in their design. It is a federal instrument, simple and predictable, and it encourages real construction. And this aspect is key. The EU should also avoid subsidizing pilot projects and factories, and instead focus on rewarding actual production of battery cells or cathodes.

The fund should be managed at a European level, with the aim of ensuring the most efficient allocation of capital across the EU, but also to exclude projects that are not technically or financially viable – the case of British Volts being inevitable. , The goal is to create a thriving industry in Europe, not a national leader. Asian or American companies should be eligible to receive the aid, provided they set up their supply chains in Europe and facilitate the transfer of powers.

A European industrial policy would have no meaning without EU money. The cleantech industry should not be based solely on France and Germany, so these countries should not monopolize all spending. If this were to happen, it would destroy the single market, and it would mean lost opportunities in Italy, Spain, Poland and many other countries.

some for some

Businesses are going to gain a lot from this subsidy war, so there has to be a compensation for the taxpayers. The European Union is working on new climate rules for heavy trucks. This new regulation should require zero-emissions trucks to account for half of new truck sales by 2030, and increase that target to nearly 100% by 2035. The move will spur demand for batteries, while also ensuring that home delivery of goods and packages is cleaner and cheaper in the long run.

Manufacturers should produce more affordable electric vehicles and eliminate waiting times. For its part, the Spanish government should promote a tax reform to modernize the current obsolete regulations, thus encouraging the corporate sector to bet on zero-emission vehicles, thus creating a new future for the automotive market. Must source for types of cars and vans. Second hand. The reform of the Moves scheme should also include used vehicles, which would facilitate access to a sustainable vehicle for a wider spectrum of the population.

Combined these measures could provide a strong boost to fossil fuel-free energy and mobility, as well as reduce Europe’s dependence on imported oil and gas and China-centred battery supply chains.

Ultimately, though, the days of fat cows in subsidies have to end, and it has to be done quickly. The EU must force the US to sit down for talks in order to pave the way for the early removal of IRA-type subsidies on both sides of the Atlantic. Battery and electric vehicles will soon be able to compete with diesel and gasoline without any subsidies. And the scarce climate money available is better spent on other things.

William Todds He is the Executive Director of Transportation and Environment in association with Agenda Publica

Nation World News Desk
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