Germany wants tax credits for green energy to counter US Inflation Reduction Act
GERMANY is planning to introduce tax credits for solar, wind and grid investments in response to the US Inflation Reduction Act (IRA).
The government is working on a new instrument for Germany that would match subsidies on offer in the US, as indicated by a document by the Economy Ministry. Any measure would need a sign-off from Brussels because of state aid rules.
US President Joe Biden’s IRA offers subsidies and tax credits to the tune of US$370 billion for the production of electric vehicles, sustainable aviation fuel and renewable energy. The European Union has been struggling to find a way to respond, amid fears that companies will channel investment towards the US.
Setting up a tax credit system is much more bureaucratic in Europe because of administrative red tape required by Brussels, Germany’s economy minister Robert Habeck said at a press conference.
While Germany’s proposal is a national one, it would support a Europe-wide tax credit system, indicated the document, which is based on recommendations by the country’s energy agency, Dena.
One of the key parts of the IRA supports manufacturing, building self-reliance and ensuring the country is not dependent on China or other nations.
The German government also wants to boost the nation’s photovoltaic industry to reduce its own dependency on China. A feasibility study is planned for March.
Germany’s solar industry has waned from its peak about a decade ago, when a wave of insolvencies purged many companies that had been set up with state subsidies.
To help mitigate risks for wind power production and grid expansion, the government also wants to set up guarantees via its development bank KfW. It also said that ideas for a transformation fund should be presented by summer 2023, which Habeck said could be a special tranche from an existing climate fund. BLOOMBERG
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