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Building a lithium-ion battery plant in Germany, Europe's leading automaker, seemed like an easy task for Northvolt. But a new U.S. law offering huge subsidies to local clean-tech manufacturers has put the company on the back burner, Reuters reported.

CEO Peter Carlsson said that under the Inflation Reduction Act (IRA), Sweden-based Northvolt could receive up to 800 million euros in U.S. government aid to build a battery plant for electric cars.

That's about four times what the German government is offering, he said, with lower energy prices in the U.S. As a result, the company is considering postponing its plans to build a plant in Heide in northern Germany.

"We are now at a point where we may prioritise expansion in the U.S. over Europe first," said Carlsson.

Executives at other companies have backed that view in recent weeks, suggesting that the $430 billion U.S. law is beginning to lure investment in clean technology from Europe's manufacturing heartland.

The law provides tax credits related to investments in clean technology, as well as tax credits for consumers who buy an electric car or other clean product made in North America.

German automakers and suppliers, for whom the United States is a major export market, were among its biggest victims.

An October survey by the German Chamber of Commerce (DIHK) found that 39 percent of companies want to increase investment in the United States, compared with 32 percent in Europe.

And DIHK trade director Volker Treier said the U.S.-German chambers of commerce have seen an increase in German investment in the United States, especially in the automotive sector.

German Economy Minister Robert Habeck told Handelsblatt that there is a danger that the next wave of technological innovation will bypass Europe - innovation is the key to helping Europe out of the energy crisis.

Industrial jobs could disappear from Germany and Europe, the head of the ruling SPD, Lars Klingbeil, told Reuters.

Habeck and his French counterpart Bruno Le Maire last week called on Europeans to respond harshly to the U.S. law, which they said violates World Trade Organization rules.

No country has yet formally filed a lawsuit against the IRA with the trade body, although both China and Russia expressed concerns about it during a WTO meeting on subsidies Oct. 25.

Europe and the United States, which are seeking to present a united front in the face of the war in Ukraine, are negotiating a possible repeal of some parts of the law or seeking exemptions for European companies, modeled on those for Mexico and Canada.

French President Emmanuel Macron, during a state visit to the U.S. this week, will try to convince Washington that weakening European companies is not in their interest, while Western allies face stiff competition from China.

In Germany, criticism of European complacency and calls for the introduction of competitiveness measures are also mounting.

"Quicker decisions (on projects), subsidies ... other financial support for companies" are some possible solutions, Habeck said.

He said Europe has its own large subsidies available for green technology investments - the problem is mobilizing them in a timely manner and getting the necessary approvals from local and national authorities.

That's one reason CMBlu Energy, a German company that has developed clean energy batteries that don't require specific critical minerals, decided to build its first plant in the United States, said CEO Peter Geigl.

"We were going to have to change our industrial policy anyhow as we are under enormous time pressure," Habeck said. "We cannot afford construction times of 12 years for a hydrogen plant."

Volkswagen brand CEO Thomas Schaefer on Monday accused the European Union of sticking to outdated and bureaucratic state aid rules.

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