The Biden administration’s climate bill is clearly triggering a rethink among European Union companies as they decide where to allocate their green investments, according to a JPMorgan Chase and Co. executive.
(Bloomberg) — The Biden administration’s climate bill is clearly triggering a rethink among European Union companies as they decide where to allocate their green investments, according to a JPMorgan Chase and Co. executive.
Companies and their investors are still waiting to see all the details of how the US Inflation Reduction Act will be implemented, but “there’s no doubt that EU-domiciled companies are looking closely at what’s on offer there,” Chuka Umunna, the bank’s EMEA head of ESG and green economy investment banking, said in an interview with Bloomberg Television’s Francine Lacqua on Wednesday.
“Definitely what they hear is attractive,” he said. “But the details will be important.”
The IRA earmarks about $370 billion to support low-carbon technologies designed to fight emissions. Europe has scrambled to come up with similar incentives to prevent companies and investors from redirecting funds to the US, amid concerns that the IRA will leave the bloc on the back foot. Banks like JPMorgan are already figuring out how to tap into the renewable energy boom that’s under way. That’s as sectors such as solar and wind — and their supply lines — look set to be turbo-charged.
The EU has proposed its own Green Deal Industrial Plan as well as a Net-Zero Industry Act to simplify regulations. But some analysts have suggested that companies may face more bureaucratic hurdles in accessing that support than they would applying for IRA incentives.
The EU is now “working out what is not there that might be being provided in the US IRA,” Umunna said. “But of course in the short term one of the easiest measures to implement is relaxing — which they are doing, temporarily — the EU state aid rules to facilitate better fiscal support here.”
“At the end of the day that is what companies in Europe will be looking at: What are you going to do? What’s it going to look like?” Umunna said. “At the moment that’s not entirely clear.”
At BloombergNEF, analysts describe Europe’s response to IRA as “a hodgepodge of airy pledges, rejigging existing pots of money and auctions for hydrogen production.” They reckon Brussels’ efforts to match IRA “will do little to usher in a new green industrial revolution in the EU.”
Ultimately, however, investors are having to navigate a “race to the top,” analysts at Barclays Plc recently wrote.
“We believe Europe’s response to the IRA should help raise the stakes in the race to develop clean tech industries and ultimately serve to accelerate decarbonization trajectories on both sides of the Atlantic,” a team of analysts at Barclays led by Maggie O’Neal and Charlotte Edwards, wrote in a client note last month.
–With assistance from Nilushi Karunaratne.
(Updates with context)
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