May 27, 2024

For years, European leaders have complained that the United States is not doing enough to fight climate change. Now that the Biden administration has poured hundreds of billions of dollars into the cause, many Europeans complain that the U.S. is doing it wrong.

This new criticism stems from deep fears in Germany, France, Britain and other European countries that Washington’s approach will hurt the allies it is supposed to work with, attracting massive new investments in electric vehicles and battery factories that will Asian countries such as China and South Korea were not destined to be.

Such concerns are the main reason some European leaders, including Germany’s second-highest-ranking official, Robert Habeck, have spared no effort to travel to Vasteras, a city about 60 miles from Stockholm to maintain Famous for its ancient tombs and Gothic cathedrals.

Officials have been traveling there to file a lawsuit against Northvolt, one of Europe’s few indigenous battery companies. Led by former Tesla executives, Northvolt was a small player in the global battery industry, but European leaders have given it hundreds of millions of euros to build factories in Europe. Mr Harbeck visited the company in February to lobby the company to move ahead with plans to build a plant near Hamburg, Germany. The company had considered delaying its investment in the United States.

“It’s certainly attractive to be in the US now,” Northvolt’s chief environmental officer, Emma Nehrenheim, said in an interview in Vasteras last month. Northvolt declined to comment in detail on discussions about the Hamburg plant that the company had promised in May.

The debate over the Northvolt plan is an example of intense competition between the U.S. and Europe, which some European officials say is backfiring as they try to secure the building blocks of electric vehicles to avoid reliance on the Chinese chain that dominates battery supply.

Tax credits and other incentives offered by President Biden’s main climate policy, the Lower Inflation Act, have attracted some investment in Europe and forced European countries to offer their own incentives, auto experts said.

Cecilia Malmstrom, a former European trade commissioner, said last month at a panel discussion at the Peterson Institute for International Economics in Washington that the US had provoked a “massive subsidy race”. . She called on leaders to “invest in the green transition together, not compete with each other.”

Biden officials argue that U.S. and European policies are complementary. They note that government and private funding for electric vehicles and batteries will lower prices for car buyers and put more emissions-free vehicles on the road.

U.S. officials added that battery factories and factories that process lithium and other materials are being built on both sides of the Atlantic.

Efforts by governments to promote electric vehicles “will spur a level of technological innovation and cost reduction that will benefit not only Europe and the United States, but also the global economy and our global efforts to address the challenges posed by climate change,” said Treasury undersecretary Wally Adeyemo said in a recent interview.

The Biden administration has also been discussing with European officials allowing cars made with European battery materials and components to qualify for U.S. tax credits. The government’s interpretation of the IRA signed by Mr. Biden in August leaves room for producers in Europe and elsewhere to benefit.

“There is less concern in Europe that these companies could be lured to the U.S.,” said Abigail Wulf, director of the nonprofit SAFE’s Center for Critical Minerals Strategies.

Still, the law forced European leaders to create new industrial policies.

In March, the EU’s executive branch, the European Commission, proposed a Critical Raw Materials Act, which aims to secure supplies of lithium, nickel and other battery materials. One such piece of legislation requires the EU to process at least 40 percent of the raw materials needed for the auto industry within its borders. The 27-nation alliance also allows countries to provide more financial support to suppliers and manufacturers.

Julia Poliscanova, senior director of the Brussels advocacy group Transport and the Environment, said the money pouring into electric vehicles in the United States and Europe would boost sales. The legislation, which needs to be approved by the European Parliament and EU leaders, would also bring consistency to the fragmented policy of governments, she said.

But Ms Poliscanova added that there was a risk that European and US policies would cancel each other out. “Because everyone is scaling at the same time, it’s a zero-sum game,” she said.

Business executives complain that applying for financial aid in Europe is bureaucratic and slow. The Lower Inflation Act, which emphasizes tax credits, is simpler and faster, said Tom Einar Jensen, chief executive of battery maker Freyr, which is building a plant in Mo i Rana in northern Norway. factory, with plans to build more in Finland and near Atlanta.

Mr Jensen said in an interview that the IRA had prompted “a dramatic increase in interest in US-produced batteries”.

The future of European car manufacturing is at stake, especially for German companies. Mercedes-Benz, BMW and Volkswagen have lost market share in China to local automakers such as BYD. Chinese automakers including BYD and SAIC are also making inroads in Europe. SAIC, which sells cars under the British brand MG, has a 5 percent share of the European EV market, ahead of Toyota and Ford in the fast-growing segment.

European automakers are frantically trying to build the supply chains they need to produce electric vehicles.

In France, President Emmanuel Macron wants to turn the northern region, where factory jobs have been lost, into a center for battery production.

On Tuesday, the Automotive Cells Company, a joint venture between Stellantis, Mercedes-Benz and TotalEnergies, opened a factory in Billy-Berclau Douvrin, France, aiming to produce 300,000 cells a year by the end of 2024. ACC also plans to invest a total of 7.3 billion euros or $7.8 billion in Europe, including opening plants in Germany and Italy, in a deal secured with 1.3 billion euros in public aid.

In Salzgitter, Germany, about 25 miles from Volkswagen headquarters, steel girders tower over concrete foundations as excavators and dump trucks buzz nearby. In just a few months, the outlines of battery factories have sprung up in a field.

Volkswagen hopes to install the battery-making machines by the end of summer. By 2025, the automaker aims to produce batteries for as many as 500,000 electric vehicles a year — a timeline it says is feasible only because the factory is built on land it owns.

Volkswagen is also building a plant in Ontario, but the company made the decision to do so after the Canadian government matched U.S. incentives.

In Guben, a small city on the German border with Poland, Canadian company Rock Tech Lithium is building a plant to process lithium ore. Mercedes strikes deal with Rock Tech to supply lithium to its battery maker.

These projects will not be fully operational for several years. Recently, the Guben site has been empty. The only construction activity was the screeching sound of a truck dumping loads of rubble.

Europe has some advantages, including strong demand for electric vehicles: About 14% of new cars sold in the EU in the first three months of this year were battery-powered, according to Schmidt Automotive Research, double the rate in the United States.

But if Europe doesn’t act quickly to help the battery industry, “you’re going to really lose momentum compared to the North American market,” said Rock Tech CEO Dirk Harbecke.

Chinese battery companies have largely avoided the United States, fearing a political backlash. But Chinese battery companies have announced investments worth $17.5 billion in Europe since 2018, according to Mercator China Institute and Rhodium Consulting.

Political tensions between Western governments and China put German automakers in a delicate position. They don’t want to be overly dependent on Chinese supplies, but they can’t annoy the Chinese government.

BMW, Volkswagen and Volvo plan to buy batteries from a factory in Arnstadt, Germany, run by CATL, the Chinese company that is now the world’s largest maker of batteries for electric vehicles.

To balance reliance on Chinese suppliers, executives and leaders in Europe were keen to work with Northvolt, whose chief executive, Peter Carlsson, oversaw Tesla’s supply chain for more than four years.

Northvolt wants to control all steps of making batteries, including refining lithium and recycling old batteries. Nellenheim, a member of Northvolt’s management board, said this should help Europe achieve supply chain independence and ensure batteries are produced in the most environmentally responsible way possible. “We are de-risking Europe,” she said.

The company develops manufacturing technology at its complex in Vasteras. Northvolt’s first full-scale plant in Sweden, 125 miles south of the Arctic Circle, was chosen for its abundance of hydropower and is the size of the Pentagon. Northvolt also plans to build a factory in the United States, but has not yet announced a location.

Still, the company is ramping up production and is not among the world’s top 10 battery suppliers, according to consultancy SNE Research. Construction of its Hamburg plant has been put on hold until EU officials approve German subsidies.

anna swanson and Liz Oldman Contribution report.

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