EU, US working on tax credits for EV minerals

Any agreement will give EU free trade agreement-like status

WASHINGTON:

The United States and European Union are working towards an agreement to make European minerals eligible for tax credits, a senior EU official said on Friday.

The $430 billion US Inflation Reduction Act passed in August requires rising percentages of battery minerals to come from the US or a free trade agreement (FTA) partner.

The EU official said an agreement could come as early as next week, in time for a visit by European Commission President Ursula von der Leyen to Washington, on a deal that would give the EU a “free trade agreement-like status.”

White House Press Secretary Karine Jean-Pierre declined to say if a high-level deal that would provide FTA-like status to the EU could be reached before von der Leyen’s visit, removing an irritant in the US-EU ties, but underscored Washington’s desire to maintain a strong working relationship with the EU. “Of course, we want to make sure there’s a good working relationship,” she said.

Up to $3,750 per vehicle of the available tax credits relate to minerals for batteries, taking effect when the US Treasury issues guidance expected later this month.

The EU official said it was critical to reach an agreement soon, given moves by some European companies to shift production to the US.

“We need to react now, and need to at least avoid as much as possible these disturbances, by granting an FTA-like status, and having better access when it comes to raw materials, battery production, for example.” He said the US side was pressing for the agreement to be “legally binding,” but it would be difficult to have that in place ahead of von der Leyen’s visit. The EU, Japan and other US allies harshly criticised the IRA’s provision requiring EVs to be produced in North America to qualify for consumer EV tax credits.

Published in The Express Tribune, March 5^th, 2023.

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