As predicted, the EU strikes back against Biden's illegal under WTO rules Inflation Reduction Act. 

The Wall Street Journal comments, The Green Subsidy War Accelerates.

The global green trade and subsidy war is accelerating, and last week the European Union fired a return salvo at the U.S. The Green Deal Industrial Plan—that’s really the name—is a direct answer to last year’s U.S. Inflation Reduction Act (IRA), and as with all trade wars both sides will lose.

Europeans are understandably upset at the IRA’s raw protectionism. The biggest flash point is the consumer tax credit of up to $7,500 that is available only for electric vehicles assembled in North America.

Europeans have also noticed the bill’s tens of billions in subsidies for a wide range of U.S. industries, from carbon capture to wind power. The fear is that this will entice such investment away from Europe.

Hence the Brussels we-too response. The proposed policy offers €250 billion (repurposed from unspent pandemic aid) to subsidize Europe’s green industries. Brussels also will offer a pass until 2025 for EU countries that violate the bloc’s usual anti-subsidy rules for green projects. This blesses aggressive French and German subsidy efforts, while the new EU kitty makes sure smaller countries with shallower pockets get a crack at their own carbon-neutral boondoggles.

Biden vs Trump Trade Wars 

Biden is doing what Trump would have done if only Trump thought of it. 

The Journal notes the Biden Administration has pursued U.S. industrial policy with a fervor that Donald Trump never imagined, and that subsidized companies like GM and other EV makers will become political hostages in the green trade wars.

Of course, Trump's reasons for made in the US would have had nothing to do with green policies, just normal America First stuff. 

Inflation Reduction Act (IRA) Flashback

On November 30, 2022, I noted The EU is Very Worried About Biden's Inflation Reduction Act (IRA)

Importantly, Germany is upset because the US is handing out free money clean energy subsidies despite WTO rules and it can't.

There’s more than a bit of irony here. Without trying, Biden has had more success than Trump in actions that splinter the EU.

Trump wanted the US to abandon the WTO. In essence, Biden may have succeeded. 

Carbon Border Adjustment Mechanism 

Please recall my December 19, 2022, post EU Imposes the World's Largest Carbon Tax Scheme, Inflationary Madness Sets In

To prevent "carbon leakage" the European Parliament Reached a Deal on a Carbon Border Adjustment Mechanism, CBAM for short. 

An EU Carbon Border Adjustment Mechanism (CBAM) will be set up to equalise the price of carbon paid for EU products operating under the EU Emissions Trading System (ETS) and the one for imported goods. This will be achieved by obliging companies that import into the EU to purchase so-called CBAM certificates to pay the difference between the carbon price paid in the country of production and the price of carbon allowances in the EU ETS.

My hoot of the day on December 19 is worth a re-hoot. 

Neither a Tax Nor a Tariff

The EU says CBAM is neither a tax nor a tariff. It's an "adjustment mechanism" to "level the playing field". Yeah right. 

The US objections to CBAM are amusing as were the EU objections to Biden's horrendously names Inflation Reduction Act that will do anything but reduce inflation. 

Biden has "strong feelings about not having excessive regulation,” says John Kerry. What a hoot!

Picking winners and Losers

Team Biden is picking winners and losers. 

When has Biden done that wisely. More generally, when does government do that wisely?

Tit for Tat?

Perhaps CBAM is the EU's way of striking back at the US for Biden's IRA.

More likely, it's just economic stupidity across the board as noted in Al Gore and John Kerry Aim to Hijack the World Bank for Climate Agenda.

Subsidies, tariffs, sanctions, and trade wars all have a cost. The result will be more inflation, more nationalism, and higher costs for consumers. 

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