EU Announces New Green Proposals to Rival Biden's Inflation Reduction Act

• The announcement comes just months after the U.S. launched its own Inflation Reduction Act.
• The European Commission, the executive arm of the EU, has previously said there are "serious concerns" about the design of the financial incentives in the package.
• While discussions with the US continue, von der Leyen wants to cut red tape in Europe and step up green investments.

DAVOS, Switzerland — The president of the European Commission, Ursula von der Leyen, said Tuesday her institution was drafting a new law targeting the region's green industries, hoping to make Europe the home of clean tech and innovation.

"We will put forward a new Net-Zero Industry Act ... The aim will be to focus investment on strategic projects along the entire supply chain. We will especially look at how to simplify and fast-track permitting for new clean tech production sites," she said at the World Economic Forum in Davos.

"We need to create a regulatory environment that allows us to scale up fast and to create conducive conditions for sectors crucial to reaching net zero. This includes wind, heat pumps, solar, clean hydrogen, storage and others."

The announcement comes just months after the U.S. launched its own Inflation Reduction Act. The sweeping U.S. legislation, which was approved by U.S. lawmakers in August and includes a record $369 billion in spending on climate and energy policies, has received some angry responses among the 27 EU nations. The European Commission, the executive arm of the EU, has previously said there are "serious concerns" about the design of the financial incentives in the package.

The EU and the United States have been at odds for several months following Washington's decision to grant tax credits to citizens buying electric cars made in North America. This poses a threat to investments in Europe and has led European companies to consider potentially relocating stateside.

The U.S. Treasury Department issued guidance in late December that would allow EU companies to benefit from certain credits without needing to alter their business models. However, other guidance on how the legislation will be implemented is still outstanding.

"The EU continues to seek similar, non-discriminatory treatment of EU clean vehicle producers under the Clean Vehicle Credits of the Inflation Reduction Act. This scheme remains of concern to the EU, as it contains discriminatory provisions," the European Commission said in a statement in late December.

American officials, including President Joe Biden, have been accused of protectionism. Speaking alongside his French counterpart in December, Biden said: "We can work out some of the differences that exist, I'm confident."

Back in October, U.S. Treasury Secretary Janet Yellen acknowledged that big changes to the legislation were unlikely.

While discussions with the U.S. continue, von der Leyen wants to cut red tape in Europe and step up green investments.

"We will prepare a European Sovereignty Fund as part of the mid-term review of our budget later this year. This will provide a structural solution to boost the resources available for upstream research, innovation and strategic industrial projects key to reaching net zero. But as this will take some time, we will look at a bridging solution to provide fast and targeted support where it is most needed," von der Leyen said in Davos.

Speaking to CNBC earlier this week, Spanish Prime Minister Pedro Sanchez also said that Europe should learn from the United States when it comes to supporting its green industries.

"We need to reform some internal aspects of our industrial policies such as state aid, reducing bureaucracy and trying to send a message for the industry worldwide that's it's Europe, and of course Spain, that is a good place to locate," Sanchez told CNBC.