The effects of the US Inflation Reduction Act (IRA) on EU competitiveness

The Inflation Reduction Act (IRA), signed by US President Biden in August 2022, is the first major climate law ever approved by the US Congress. The IRA aims to radically increase the pace of decarbonisation in the US by offering subsidies, tax breaks, and government investment. In the EU, there are fears that investment will switch from the EU to the US and that transatlantic trade and investment will be distorted. This in turn calls for an immediate and ambitious response from the EU.

The Confederation of Swedish Enterprise (Svenskt Näringsliv) has commissioned Copenhagen Economics to examine the possible impact of the IRA on EU competitiveness, EU-US trade, and foreign direct investment (FDI). This report presents the findings from Copenhagen Economics and puts them into a wider policy context, with proposals from the Confederation of Swedish Enterprise on how the EU should, and should not, respond to the IRA. The analysis conducted by Copenhagen Economics can be found in the annex of this report.