U.S. President Joe Biden has a plan to boost clean energy in the United States, but European politicians worry it could drive companies and investment away from Europe.

The U.S. Inflation Reduction Act has promised $369 billion – an unprecedented amount – on climate and energy policies, including, among many other things, tax credits for consumers getting new electric vehicles.

The fear among Europe’s policymakers is that the legislation may prompt European businesses to relocate to America or develop expansion plans stateside so they can benefit from the subsidies.

Maria Demertzis, senior fellow at the think tank Bruegel, said: “There are two issues here. The first one is that there is a bit to the IRA that is in direct violation of international rules of trade. And the second one is that there is a bit that can actually distort competitiveness.”

A spokesperson from the U.S. Trade Representative’s office told CNBC that “none of our trading partners to date have publicly threatened to sue the United States over this legislation at the World Trade Organization.”

“The Inflation Reduction Act represents a historic investment in clean energy and green technology. We urge other countries to follow the United States’ lead and pass their own versions of this legislation,” the spokesperson said.

CNBC heads to Sweden to find out how these trade tensions are making businesses reconsider their investment plans.

#CNBC #ClimateChange #Europe #InflationReductionAct
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