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Columbia Energy Exchange

The Transatlantic Industrial Arms Race


Sagatom Saha [00:00:04] There are really two concerns with the IRA. It’s one, the protectionism of IT preferences, North America versus the rest of the world. Europe doesn’t have NAFTA, for example. There are things that leave the EU out, but then there are things that affect everyone who’s not America, which may just this huge investment signal. To that point, it’s very difficult for the EU to muster up a similar scaled investment signal.

Bill Loveless [00:00:26] A push for stronger climate policy should unite Americans and Europeans. Instead, it may be raising trade tensions. The Inflation Reduction Act was a signal that America is a serious player in global climate negotiations. But European countries worry the bill would be a threat to their domestic manufacturers, and they take complaints directly to the Biden administration. The EU responded by proposing a Green Deal industrial plan, which will match American subsidies to clean energy manufacturers. And European officials are also pursuing a green tariff in 2026, which would tax imports of carbon intensive goods. How will this trans-Atlantic industrial arms race play out? And will it cause trade disputes between the U.S. and the EU to escalate? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Bill Loveless. Today on the show, Noah Kaufman and Sagatom Saha. Noah is an economist and research scholar at the Center on Global Energy Policy. His work focuses on energy and climate change policy. Noah has served as a senior economist at the Council of Economic Advisors under President Biden. He also served as the deputy associate director of energy and climate change at the White House Council on Environmental Quality under President Obama. Tom is an adjunct research scholar at the Center on Global Energy Policy and is an expert on the global energy transition and America’s competitiveness in clean energy technologies. He previously worked on clean tech competitiveness at the International Trade Administration in the U.S. Department of Commerce, and he served as an advisor to John Kerry, the U.S. special presidential envoy for climate. I asked Sagatom and Noah about the details of the U.S. and EU domestic industrial policies. We discussed why the two approaches to decarbonization have raised tensions and how they might play out economically and diplomatically. I hope this conversation helps you understand the intricacies of this complicated topic. Noah Kaufman, Sagatom Saha, thanks for joining us on Columbia Energy Exchange.

Noah Kaufman [00:02:52] Great to be here.

Sagatom Saha [00:02:53] Thank you for having us.

Bill Loveless [00:02:54] Well, it’s a topic I’ve been wanting to talk more about for a bit now, and I was prompted by an article that appeared in a media outlet called The Conversation. It was a piece written by you, Noah and Sagatom, as well as two other colleagues from the Center on Global Energy Policy, Chris Bataille and Gautam Jain. Chris, of course, is a research fellow there at the Center and Energy and Climate Policy, and Gautam is a senior research scholar in financial markets. The piece, as you know, was entitled As US EU Trade Tensions Rise, Conflicting Carbon Tariffs could Undermine Climate efforts. And I think it sort of states the case that a lot of us have been talking about recently. One, just today I was reading a headline story that said reminded me how these European concerns over provisions of the U.S. Inflation Reduction Act continue. Germany’s Economic Minister Robert Habeck, and France’s finance minister, Bruno Le Maire, met with U.S. Treasury Secretary Janet Yellen and other officials, and they voiced their complaints over the US law and its $369 billion in green subsidies. The Europeans, of course, said that unfairly stifles competition and could violate trade laws. It’s been an issue since the Inflation Reduction Act was passed last summer. Right now.

Noah Kaufman [00:04:23] It has. I think I saw someone say recently that Europe was moving from the anger to the acceptance phase with with some of these visits. And I think if that’s true, that that’s a good sign. It does seem like recently we’ve seen, you know, instead of threatened reprisals, sort of proposals for countermeasures from Europe. And on the whole, I think we’re better off seeing, you know, a race to the top with with countries, you know, trying to build their own clean energy industries as opposed to trying to tear each others down. But I just think as we wrote an article, there’s there’s no question that it raises very tricky international trade issues that will need to be resolved.

Bill Loveless [00:05:08] Let’s take a time first. Remind us what the Inflation Reduction Act would do to stimulate investments in clean energy in the United States and why that approach has been received so poorly in Europe.

Sagatom Saha [00:05:22] Absolutely. And I mean, it’s $370 billion almost in that signals that it does quite a lot of things to zero in on, I think, where the European concerns stem from. It’s largely the tax credits, specifically tax credits which provide 77 $7,500 for the purchase of EVs. And it’s a bifurcated tax credit, half of which if the vehicles made finally manufactured in the United States, in North America, rather, you can receive that tax rate. The other, which is very interesting, is if the critical minerals are sourced in North America or a free trade partner country, you can receive that tax credit. And that’s been a real focus for the Europeans. And where we’re actually seeing, to NOAA’s point, some flexibility from the Biden administration, which now is kind of toning down the rhetoric where it now looks like Treasury and they’re asking for guidance for how to implement the Inflation Reduction Act is going to define differently. You might say redefine what a free trade agreement free trade partner generally means to include. Perhaps any country where we have some sort of trade agreement and a critical minerals agreement which would directly assuage that European concern. And on the flip side, and perhaps why we’re seeing additional flexibility from the Biden administration, a lot of sources of critical minerals, one need for these supply chains to create to manufacture these electric vehicles. They’re not built in the United States yet. We don’t have the supplies of critical minerals, and perhaps there aren’t sufficient supplies in the existing set of FTA countries. So we need to look to places like Argentina, for example. So there’s a bit of a double benefit, but maybe in addition to that tax credit and the protectionist provisions there, I think there’s also a broader concern over this is such a strong pot of money, such a strong demand signal that. Any firm that operates globally and thinks, where am I going to invest in clean energy? They might siphon some from Europe and then to the other market to the United States.

Bill Loveless [00:07:26] Right. Right. They want to get into some of the ways in which the Biden administration has been responding to these concerns from the EU. But, you know, I can’t help but ask Noah. I mean, are Europeans right to express concerns about protectionism?

Noah Kaufman [00:07:40] My sense of, you know, concerns from politicians about protectionism is that, you know, everyone complains when others do it, and then everyone does as much as they can get away with. Right. You know what? We’re going to watch the Super Bowl this weekend and everyone will be going crazy about the other team holding. Right. And then you want your players to hold as much as they can without getting penalized for it. Right. So I don’t know. I don’t put a ton of stock into the complaints. I do think, though, like in the past, we sort of had the World Trade Organization as a somewhat credible arbiter of these complaints. And it’s just not clear going forward that they are going to be as influential as they have been in the past. So it does make you wonder how we will work some of these issues out going forward. I mean, the US and the EU are allies, but we’re not going to go to war over this. We’ll find a way through this. But you know, I think it might be more on a bilateral basis then than than than in the past.

Bill Loveless [00:08:46] But I mean, the European Union has, of course, has responded. It’s launched its own initiative to counter that of the United States and promote clean energy development in Europe. It’s called the Green Deal Industrial Plan. We’re beginning to hear more about it. What would that plan do?

Sagatom Saha [00:09:04] They come out somewhat ambivalent, perhaps a little a tad bit unsympathetic to the concerns for all the reasons that Noah said. But I think if you take European concerns in the context of their current energy crisis, where they are facing wholly separate from the IRA and preceding the IRA, all these concerns over high energy prices, which will lead perhaps a de industrialization in these same industries and not across the board, but perhaps in Germany that’s more acute. You can see how this is perhaps at least definitely was initially perceived as kicking kicking them while they’re down. At the same time, it’s hard for me to not think that this is perhaps a dominant strategy in terms of creating U.S. climate policy. This is the only way we were able to do it after two and a half, two years, 18 months of negotiations. It had to have some sort of domestic industrial benefit. We are constantly talking about how industrial policy is back in vogue. And I suspect that going forward, this is this is in some ways American, but perhaps not uniquely so. But other countries and this is I mean, you’re seeing this in the responses to the Inflation Reduction Act, other countries wanting to pare their green investment plans, their climate plans with their own versions of kind of protectionism. So I think it cuts both ways.

Noah Kaufman [00:10:23] And if you think of this from the, you know, the perspective of a US policymaker, you know, the United States is one of the largest fossil fuel producers in the world, you know, the fossil fuel industry and the automobile industry. These are massive sources of jobs, of government revenues that provide public services to different parts of the country. We run our net zero scenarios. And, you know, and it’s not that all of these industries go away, but a lot of them go away. So I just think the idea that we’re just going to hope that other industries come in and replace them is not it’s not viable politically and even economically. It’s not, you know, it’s feasible. And I think that’s does that good times point. That’s why you’ve seen this shift towards green industrial policy. It’s this recognition that we need domestic producers to succeed at these industries of the future if we’re going to have a competitive economy going forward.

Bill Loveless [00:11:24] Yeah. And of course, you know, as in Germany and elsewhere in Europe now, they they worry about the impact on some of their native industries steel, aluminum, others that are heavy industrial users of energy, including natural gas, which has been a concern in Europe since the war in Ukraine began last year. So perhaps it is understandable that there would be this outcry even as the EU continues to work on its own green energy plans. But back to that European response, this Green Deal industrial plan, what would that plan do?

Sagatom Saha [00:12:02] Yeah, so it came out of the Commission on February one and it’s a bit light on details, but very interesting. And how I mean, in my estimation, how closely kind of mirrors in some ways the IRA and also the debate we’re having in the United States. So. And you can kind of summarize it into four elements. So it’s regulation and kind of in the same vein as the transportation permitting debate here. The EU, similar to the United States, has fairly long permitting timelines, project timelines for deploying clean energy. That’s something they want to simplify, reduce regulatory costs, create a simplified, predictable regulatory environment that kind of maps on quite well to the conversation we’re having here. There’s also a funding element very similar to the IRA in terms of subsidizing clean energy, and then that entails a variety of measures, temporary flexibility and state aid rules, which then introduces some really interesting elements, and that really benefits the larger countries like a France or Germany, perhaps France, for example, which has the money to spend, but perhaps then internal to the market. Second way investment from the smaller countries internal market. They’re also really focused on skills building and kind of creating universities to help the European workers build these industries of the future. That’s probably a concern that’s under focused on in the United States, where there’s a clear with not enough people in the labor pool and then a skills mismatch to get all this stuff and then a focus on trade supply chains. There is an element of let’s make sure we’re aligned with the US, the WTO, and an idea of a critical minerals supply, raw material supply gap, I think it’s called for. I think they would desire to avoid any sort of dustup or friction that I described with the tax credit.

Bill Loveless [00:13:54] Right. And as I understand it, it would rely upon something called the European Sovereignty Fund. Right?

Sagatom Saha [00:14:00] They would take some existing money, repurpose it or really fully use, I think is the way they talk about it. The existing €700 billion or a fund they believe stands for Recovery and Resilience Facility, which is the COVID money that already exists for a lot of these similar projects. They want a new sovereignty fund, which would be new grant funding for a lot of this. That would be the element that you could perhaps say is comparable to the new IRA funding. They want to do that. That’s going to be, I think, the most difficult element to actually be is going to be the most drawn out contentious element of all of this. The rest, perhaps is fairly agreeable. For example, state aid rules have been relaxed before over COVID. And some ways this is really an evolution of things that have happened previously. But this is the new element. The scale of funding will be the big question mark. I forget exactly what the EU calls for, but you can imagine a range of tens of billions to $100 billion range. I suspect and one of the reasons and what I was the distinction I was drawing earlier with there are really two concerns with the IRA. It’s one, the protectionism of the preferences, North America versus the rest of the world. Europe doesn’t have an FDA, for example. There are things that leave the EU out, but then there are things that affect everyone who’s not America, which just is this huge investment signal. To that point, it’s very difficult for the EU to muster up a similar scale of investment single.

Bill Loveless [00:15:21] Right. And how does this relate to the EU’s Green New Deal, which, you know, that plan has been around for some time now?

Noah Kaufman [00:15:31] Well, and there is also the EU’s fit for 55 plan, I think they call it. It’s hard it’s hard to keep these things straight. But I think the bottom line is that the EU has very strong, you know, arguably world leading ambitions to decarbonize its economy over the next couple of decades. You know, the 5455 is named in that way because they’re aiming to get the 55% emissions reductions below their 1990 levels by 2030. So that’s beyond, I think, that 62% below 2005 levels, which is the baseline that we use here to get to our 50% goal. So it’s it’s beyond even the US ambitions. So, you know, it’s it’s it’s an impressive package from from a climate policy wonk standpoint of both investments and also on the policy stick side of things, which is something we’ve been less successful on on this side of the pond in getting it across the finish line. It’s really centered around this emissions trading system, which is essentially a carbon price. And right now half and growing and the future of the emissions in Europe.

Bill Loveless [00:16:47] Yeah, and it’s not just subsidies, right. That the EU has in mind as as you note, the EU has reached a provisional agreement, as I understand it, on a carbon border adjustment mechanism, something that would be applied starting in 2026. How would that mechanism work?

Noah Kaufman [00:17:04] Well, this is just an extension of the carbon price that I mentioned earlier. So the carbon price to date has been applied domestically within Europe, and there is a fear of what is known as carbon leakage, which means if you apply a carbon price on your own domestic producers but not on imports from foreign producers, your domestic producers will lose market share. And how much market share is an empirical question, and one will never get the answer to because no government is ever going to run that experiment where they just implement a carbon price on their domestic producers and do nothing else. So what the European Union has done to date is to provide compensation for their domestic producers for the costs imposed by the carbon price. And what they’re doing with this carbon border adjustment mechanism or cbam proposal, is suggesting that they’re going to phase out the compensation to domestic producers and phased in tariffs on imports of the same product. So at the end of the day, what you’d end up with, at least conceptually, is a carbon price that’s applied equally to domestically produced goods and foreign produced goods that are sold in the EU.

Bill Loveless [00:18:24] And those carbon prices, as I recall, are ranging from what, 70 to €100 per metric tonne or $75 to $105 or so.

Noah Kaufman [00:18:33] That’s right. I mean, for many years the prices were very, very low in the EU, maybe single digits. And that’s not much different from not having a climate policy at all. But over the last five years, the program has strengthened a lot, in part because of these market reforms that they put into place. And Right. I think we’re around $100 a tonne in recent days and that that’s that’s a pretty strong incentive to reduce emissions.

Bill Loveless [00:19:01] But do you think you want to get in a minute, too, to how the how this the response from the U.S. there as they become aware of this of these of this proposal. But but I just wonder is is is is Europe waging a subsidy race? It can’t win.

Sagatom Saha [00:19:19] If you want to go back to the previous point, I wouldn’t say wage. I think they’re completely responding. They were taken aback by the Inflation Reduction Act, which, you know, I think a lot of us, if you think back to August seven very quickly. So they’re responding. But I think to your point, this is now legislation. Republicans are saying they might. Some are saying repeal. Some are saying tweak in some ways. I mean, this is a whole different rabbit hole. There’s a lot of benefit for Republican states and Republican districts, but neither here nor there. This legislation is not going away. So now Europe has responded. Back to your point, and I think I mentioned this earlier, Can they match it? Likely not. And both in terms of scale, as you know, as a club, in a way, you use a club and then there just stays because of the internal market. And then I think it’s more of an adherence and trying to preemptively get ahead of or stay in compliance with the World Trade Organization rules. I don’t think anyone who is developing the IRA necessarily had that. In mind when they were thinking through the legislation. Europe is probably going to take the same path at the same level. I think that really matters here in their response.

Bill Loveless [00:20:29] Well. Well, no, if they can’t. I don’t know if you would agree with Saga Tom here. No, but I mean, if they can’t match it, then that suggests competitive problems down the road.

Noah Kaufman [00:20:39] I mean, it depends what you mean by problems, right? I mean, if you ask a lot of economists about some of these arguably protectionist provisions that they would say this is bad for the United States also. Right. And I just don’t think I don’t think it’s obvious that it’s in the country’s best interests always to want to source domestically, not number one. You’re probably going to raise the cost of, you know, the clean energy that you’re trying to deploy as quickly as you can. Number two, the government doesn’t always do this stuff very well. Like we’ve got a lot of failures in the past of trying to promote certain industries. So I just bring this up because it’s just a different strategy, right? It happens to be a very politically popular strategy, and I think there’s certainly an economic logic to it that I described earlier about, you know, the degrading competitiveness of the fossil fuel industry, that that is sort of core to the US economy over time. But I don’t think. I don’t think you necessarily want to look at it as whoever can subsidize their own domestic industry the most wins.

Bill Loveless [00:21:49] Well, the Bush administration obviously is not standing still. It’s it’s heard the concerns raised in Europe. It’s looking at Europe and other nations with whom the U.S. is aligned on and trade and geopolitics and other things. And it’s come up with some new ideas. One is called the Global Agreement on Sustainable Steel and Aluminum. And it would be a sort of, as you guys describe, a green steel club of nations that would cooperate on reducing emissions by levying tariffs on relatively high emissions imports. What second time? What’s all that? What’s that all about?

Sagatom Saha [00:22:33] You’re jumping off from kind of where Noah got and what we were just talking about, the Cbam. I mean, there will be you mentioned a three year implementation phase. Not to say there will be a lot of friction in that period. There are administrative costs. That’s when the importers will have to start collecting data on the carbon content, all of that. But the actual tariffs themselves go into effect later and still phase in. But what CPM requires leads to a lot of interesting. I mean, it makes sense in the sense that you’re raising the domestic ETS price, you want to cover carbon leakage. There’s a very economical or sensible policy to an economist to invoke Noah, but at least some really interesting political outcomes that I think would not be desirable if you started from that perspective where I’m overly simplifying, but it requires the EU to essentially impose a carbon tariff on any country that does not have an equivalent carbon price. I’m overly simplifying, but that’s largely the case. That includes a lot of developing countries, that includes the United States. So the United States wants to avoid an outcome where it is then facing a carbon tariff on these sectors, certainly with US steel, aluminum with this proposal from the EU. So that’s what the proposal is. That said, we don’t really know what the details are. We have a New York Times article and then various conversations where we’re trying to glean details from folks. But you I think broadly speaking, it’s a club. It was start with the US and EU. Those inside the club would be treated differently. There are a variety of design decisions that, as Noah, I and our coauthors continue to work on our work on this are now thinking through in real time as well on what the differences are. But is there an internal tariff? Even though even though everyone’s in the club, there are still differentials and, you know, steel is slightly lower carbon than EU steel? Do you account for that or you just say you’re in the club? No tariffs and then their external tariffs do this tariffs scale with carbon content. What’s interesting about Cbam is that it starts from zero it in charge of any carbon content. The United States really doesn’t like that because we don’t have a domestic carbon price. So we’d rather say here is de minimis starting point, probably based on a lot of our steel production is electric arc furnace. We would probably use that as the zero point. I don’t know how other countries would feel about that, probably not as positively. But all of this said, that’s what the proposal is. That was December. I don’t know how discussions are going, but from discussions I’ve had with the various folks, it seems like the EU will say thanks but no thanks, in large part because gas exists to sidestep cbam and there is a three year period where they will probably be in negotiation. I could be wrong about that. We might get to October 2026 when the administration period kicks in or 28 October of this year. The administrative period kicks in and we may see progress, but I think this is a starting point, not the end point.

Bill Loveless [00:25:25] Yeah, you’ve said this climate club idea has been compared to the Montreal Protocol, which was which enabled nations to phase out ozone depleting chemicals. I mean, is that a possible comparison?

Noah Kaufman [00:25:38] Noah First of all, because at the time accused me of being an economist, I just I need to accuse him of being an Eagles fan, which I would say is one of the few one of the few worse things that that there is.

Bill Loveless [00:25:51] Yeah.

Sagatom Saha [00:25:52] When you mentioned football at the top, I should have mentioned it.

Bill Loveless [00:25:55] So there you go. So I got to take that.

Noah Kaufman [00:25:59] But I would say that actually the Climate Club Montreal Protocol comparison is an optimistic vision of what the Biden proposal could perhaps become like. Second time said, the details are very light right now. And the only thing we really know about are these tariffs. Right. So the more pessimistic version is to say we are imposing a tariff on other countries because our steel and aluminum industries are relatively clean. And this is a way to you know, the Trump administration had their excuse for tariffs and we’re using climate as an excuse for ours. But I. Do you think that the people working on this in the administration are right to point out that some international collaboration is needed on the decarbonization of products like steel and aluminum? It’s not the same thing as electric vehicles, for example, where maybe we can just make a better product than an internal combustion engine vehicle and everyone will just adopt it. And we’re done. But just by innovating with something like carbon free steel, you know, India is probably going to be building out a whole, you know, new fleet of steel plants over the next couple of decades, if we want them to sort of leapfrog to very low carbon versions of steel. So some international collaboration is going to be needed so that something like a climate club where countries can come together and align their incentives and you’d have, you know, sticks in the form of tariffs and you’d have carrots in the form of investments, particularly, you know, to help with technology in developing countries. This could be a pathway to decarbonization of these very difficult to decarbonize sectors.

Bill Loveless [00:27:51] Yeah. I mean, U.S. officials or Biden administration officials seem rather bullish on this proposition. I read in The New York Times article that Katherine Tai, the U.S. trade representative, called the steel and aluminum effort, quote, one of the most consequential things that we’re working on between the U.S. and the EU with respect to trade. And she said it was on track to meet a goal of completion by later this year. So that said, it just seems there’s so much here to work out. It just seems. So sketchy.

Sagatom Saha [00:28:28] That’s a good way to phrase it. I am less optimistic just given the overall political environment that something is going to get concluded this year. But I am more than happy to be wrong. But I think the assessment of how much this matters is true in the sense that.

Noah Kaufman [00:28:43] This isn’t.

Sagatom Saha [00:28:45] This is probably U.S. specific. But we have a political environment where negotiating new free trade, free trade agreements is less popular than it used to be. And that doesn’t necessarily depend on who occupies the White House. So then we have to figure out how to work trade in ways that doesn’t require ratifying something or renegotiating or renegotiating updating free trade agreements. If you work backwards from that premise, you get to something like this. I think you naturally get to something like the global Agreement on Sustainable steel and aluminum kassa. And more importantly, if it succeeds, you’d hope it’s a template whether for other countries you expand the club or other sectors. And it just covers to see BAM is far more wide ranging than than what this entails. So it matters quite a bit.

Bill Loveless [00:29:37] Yeah.

Noah Kaufman [00:29:38] I think the main reason to be skeptical of an agreement this year is that the two sides are not even solving for the same problem. Right now they eat. The EU has the cbam as really as a mechanism to help strengthen its carbon price. And you know, it’s saying let’s levelized the costs of the policy, you know, across importers and domestic products so that we can raise the ambition of our climate policies really like unilateral ambition, right? Whereas the US is saying something different. They’re saying let’s work together across borders to decarbonize specific sectors without the need for something like a carbon price. So I do think, particularly because of how far down the road Europe is with its cbam, you know, and the fact that who knows who will be president in a few years, it’s going to be really difficult for these two sides to come to agreement anytime soon.

Bill Loveless [00:30:44] Yeah, I know you’ve long been an advocate of a price on carbon and including one in the United States and have acknowledged the unlikely. It’s that something unlikely to happen at least any time in the near future in the United States for political reasons. So do you sort of you still do you pushed that idea aside. Now, this idea of a carbon price given political circumstances.

Noah Kaufman [00:31:12] I do. I mean, like most economists, I teach my students that a carbon price makes all the sense in the world as a centerpiece of a climate strategy or as a starting point for a broader portfolio of climate policies. But the United States doesn’t need a starting point anymore. We just passed these massive pieces of legislation over the past few years that do a lot of the same things as the carbon price just from a different perspective. Right. We are spending money to make clean energy cheaper as opposed to putting in place a constraint to make dirty energy more expensive. So I think the task at hand now for the United States is to fill in the gaps and strengthen the laws that we have, as opposed to thinking about something as broad based as a carbon price.

Bill Loveless [00:32:05] And so good time. I think you wanted to jump in there.

Sagatom Saha [00:32:08] Yeah, I just know. And it mentioned several the fact that the US and EU are not solving for the same thing and tariffs, clubs, what have you. That’s absolutely right. He mentioned a handful. But I would also add, I mean, within the EU there are probably different views on this and certainly that applies within the United States where one introduces a lot of Republicans you’ll see in Congress are actually quite keen on various carbon tariff proposals and are thinking through their own one, because I believe they probably have. They see that they need to be a little more forward on climate. That’s part of it. But there’s also this carbon advantage argument that I, when I, I came to actually the Senator from time at the Commerce Department in the State Department, and this was talked about a lot, that the US steel is actually quite low carbon compared to other steel produce around the world. So perhaps we should try to pricing that advantage. And then whether that leads to import substitution or we trade more steel with other like minded partners and specifically not China. From a certain point of view, you can do that with carbon tariffs. So folks are solving for various things and you can be very interested in a carbon club and a cbam without necessarily caring about all the things no I mentioned as well. But I think most folks would.

Bill Loveless [00:33:21] You know, each of you worked in the Biden administration cycle time. You mentioned that commerce and no at the Council of Economic Advisers at the White House. You know, given your insight from being inside for a for a period of time, help us understand what we how what we should be watching for going ahead on these issues and where we should be watching in the administration.

Noah Kaufman [00:33:46] Well, I mean, I think to me, probably the most exciting action this year could come from the agencies in the form of regulation and who knows what will happen at a divided Congress. But I think what we know for sure is that we’re going to see a series of regulations from EPA on carbon dioxide and other pollutants. And I think there’s a lot of uncertainty about what’s going to be in there, you know, particularly after the Supreme Court decision, West Virginia versus EPA. That certainly didn’t stop EPA from regulating, regulating, but maybe reined in their ability to go big in certain ways. But EPA could still say, you know, natural gas power plants effectively need carbon capture to be built in this country over the next decade or so. And that would be, you know, a massive change in the plans of a lot of utilities and hugely controversial and potentially influential to our emissions pathway. So those are the kinds of things I’ll be most looking out for.

Bill Loveless [00:34:55] And how about you saying a term? Of course EPA is important, but again, on these issues, we’ve been discussing trade and relations with other countries and all and the way the United States would support the industries and clean energy in its own country, Where should what should where should we keep our eye focused?

Sagatom Saha [00:35:13] I’ll name a few. And we already, I think, talked about most of them. I don’t expect much to happen. Let’s talk about the IRA first. I don’t expect much to happen in terms of tweaks in Congress, but it’ll be interesting to know what the Republican thinking is. We’ve seen a little bit I mean, it’s still early going in the new Congress, so I’d love to know what the thinking is there as they think through IRA permitting reform, perhaps export promotion and then carbon tariffs. You imagine some of this is going to get taken in tandem, at least from a thinking perspective. But Congress aside, I’m really looking out for the Treasury guidance in March on IRA implementation of the EV tax credit, which I mentioned before. There really it seems like they’re really asking folks to tell them that if they can flexibly interpret a free trade agreement, a free trade partner, as written in the IRA, well known about a month or so, if it doesn’t get pushed back again. And then I guess the negotiations are being led by the US trade representative. You mentioned Katherine Tai. I am super curious how visible that is and what we’ll be able to glean from an outside perspective. And then there’s also input, I think, on the climate element from Secretary Kerry’s team in the State Department. But I I’ll say blanket statement. If you saw if I were to see a situation where Trade Representative Tai and Kerry have some sort of meeting with Timmermans and they in their comments in the European Commission, I would find that very interesting. And I would take that as a sign of progress. That’s not something we’ve seen yet. But there’s a lot of here left.

Bill Loveless [00:36:41] Well, there’s certainly a lot for us to watch going forward on this issue that’s so important, of course, not only to the United States, to the European Union and to countries around the world. Noah Kaufman, Sagatom Saha, thanks for joining us on Columbia Energy Exchange to talk about this.

Sagatom Saha [00:36:57] Thank you for having us. Thanks.

Bill Loveless [00:37:03] Thank you. Again, Noah Kaufman and Sagatom Saha, and thank you for joining us on Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by Jason Bordoff and Bill Loveless. The show is produced by Stephen Lacy and Erin Hartig from Post-Script Media. Additional support from Daniel Prop, Natalie Volk and Kyu Lee. Roy Campanella is the sound engineer. For more information about the podcast or the Center on Global Energy Policy, visit us online at Energy Policy, Columbia dot edu or follow us on social media at Columbia U. Energy Rate or review the show on Apple or Spotify. And if you really liked it, share it with a friend or a colleague. It helps us reach more listeners like yourself. We’ll see you next week.

A push for stronger climate policy should unite Americans and Europeans. It might be raising trade tensions instead. 

The Inflation Reduction Act was a signal that America is a serious player in global climate negotiations. European countries, however, worried the bill would be a threat to their domestic manufacturers and took their complaints directly to the Biden Administration.

The EU responded by proposing a Green Deal Industrial Plan, which will match American subsidies to clean-energy manufacturers. European officials are also pursuing a green tariff in 2026, which would tax imports of carbon-intensive goods. 

How will this transatlantic industrial arms race play out? And will it cause trade disputes between the U.S. and EU to escalate?

This week, host Bill Loveless talks with Noah Kaufman and Sagatom Saha.

Noah is an economist and research scholar at the Center on Global Energy Policy. He served as a senior economist at the Council of Economic Advisers under President Biden. He also served as the deputy associate director of energy and climate change at the White House Council on Environmental Quality under President Obama.

Sagatom is an adjunct research scholar at the Center on Global Energy Policy and is an expert on the global energy transition and America’s competitiveness in clean energy technologies. He previously worked on cleantech competitiveness at the International Trade Administration in the U.S. Department of Commerce, and served as an adviser to John Kerry, the U.S. special presidential envoy for climate.  

Noah, Sagatom, and two of their colleagues, Chris Bataille and Gautam Jain, recently published an article in The Conversation about how conflicting carbon tariffs could undermine climate efforts. Bill talks with them about the details of the U.S. and EU’s domestic industrial policies, and why tensions are flaring between them.

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