Caution sounded on EU's Green Deal

'Toxic' effect

Vestager described the US legislation as having a "toxic" effect on some European industries and insisted that a further relaxation of state-aid rules should be targeted and temporary.

German Finance Minister Christian Lindner said on Monday that Europe did not need an "excessive" overhaul of the rules but backed measures to streamline decision-making.

Dutch Prime Minister Mark Rutte said on Monday that France and the Netherlands are aligned when it comes to the ways the European Union could deal with the "unintended consequences" of the IRA, he said after a meeting with French President Emmanuel Macron.

"While there are legitimate concerns over the fairness of other countries' green industrial policies, it is important that the EU's response does not reflect a zero-sum thinking as the US does," said Yan Shaohua, an associate professor at the Institute of International Studies at Fudan University in Shanghai.

"China and the EU have more consensus and common interests than differences in the area of the green transition. Both sides should work together to make sure that their competition serves not only their national interests but also the common good of our planet."

Qin Yan, an Oslo-based lead carbon analyst with financial data provider Refinitiv, said the EU measures will provide a positive impetus to reduce emissions in European industrial sectors and maintain their competitiveness in global markets.

"However, this communication and in particular the net zero industrial act mentioned in this plan is mainly a response to the green subsidy under the US IRA," she said.

"The measures outlined in the plan will de facto launch a global green subsidy race that could counteract global climate efforts."

Qin pointed out that large government subsidies are not always effective. They can create barriers that only benefit domestic producers and hold back global cooperation and the advancement of technological breakthroughs, the analyst said.

"Countries should be looking for ways to work together on clean energy and emissions reduction efforts rather than designing these kinds of inefficient protection policies and dragging each other's feet," she said.

Agencies contributed to this story.