The European Union is deeply concerned about proposed tax breaks for buying electric vehicles in the United States as they would be biased against foreign manufacturers and violate World Trade Organization (WTO) rules, Reuters reported.
Under a provision in the $430 billion climate and energy bill that was passed by the Senate, US buyers of zero-emission electric vehicles (EVs) will be eligible for tax credits of several thousand dollars.
However, domestic content conditions will apply to the tax credits to reduce the EV industry from dependence on China and encourage local investment.
"We think it's discriminatory, that it is discriminating against foreign producers in relation to U.S. producers," said European Commission spokesperson Miriam Garcia Ferrer. "Of course this would mean that it would be incompatible with the WTO."
She said the EU agrees with Washington that tax breaks are an important incentive to spur demand for electric vehicles and promote green transport and reduce greenhouse gas emissions. "But we need to ensure that the measures introduced are fair and ... non-discriminatory," she said. "So we continue to urge the United States to remove these discriminatory elements from the bill and ensure that it is fully compliant with the WTO."
A group of major automakers said last week that most electric vehicle models will not be eligible for tax credits due to vehicle battery and critical mineral requirements that must be sourced from the United States.
Electric vehicle tax breaks are part of the Inflation Reduction Act, which is likely to be passed by the House of Representatives this week and then sent to the White House for President Joe Biden to sign.