The Energy Transition, Protectionism and Transatlantic Relations

Abstract

Abstract US President Joe Biden has worked to repair the damage done to the transatlantic relationship by his predecessor, quickly realigning the United States with Europe on issues of energy and climate change. However, the US Inflation Reduction Act (IRA) of 2022 introduced a raft of protectionist subsidies for US clean-energy industries and reignited tensions between the US and the European Union. The EU has warned that the IRA could damage the bloc’s industry and American critics suggest the act may trigger a new US–EU trade war. The Biden administration’s geopolitical internationalism is at odds with its geo-economic nationalism. The fact remains, however, that Europe is unlikely to be severely affected by the IRA. Moreover, European political leaders have threatened more aggressive responses to the IRA than they can deliver. A trade war is unlikely. It is more likely that booming green industries in the EU and US will open new avenues to cooperation between them.