U.S. Treasury Secretary Yellen Touts Clean Energy Investments Amid European Complaints

Strategic Insights -

U.S. Treasury Secretary Janet Yellen visited an electric vehicle battery plant in Tennessee to promote the country's clean energy investments, fueled by President Joe Biden's climate legislation. The visit came on the heels of Biden's State of the Union address, where he touted the law's potential to rebuild the U.S. manufacturing base. However, European and Asian allies have expressed concerns that the tax subsidies in the Inflation Reduction Act will divert green investments away from their regions towards the United States.

Key Takeaways:

  • The Inflation Reduction Act provides tax credits to spur clean energy investment and production, with a focus on place-based investments.
  • The law aims to shift the U.S. battery supply chain away from China, which currently produces 70% of batteries for electric vehicles.
  • The Treasury has tweaked some rules to make more electric vehicles eligible for up to $7,500 tax credits, including the Cadillac Lyriq and Tesla's Model Y.
  • European and Asian allies have complained that the Inflation Reduction Act's tax subsidies will pull green investments away from their regions.
  • The European Union is readying its own competing incentives, with French Finance Minister Bruno Le Maire calling for transparency around U.S. and EU subsidies.
  • The U.S. Treasury has already revised the retail price cap for eligible electric vehicles to $80,000 from $55,000.
  • The Treasury plans to finalize the rules on battery sourcing, but has drawn criticism for not issuing proposed guidance until March.

Statistics:

  • 2.8 million-square-foot (260,130-square-meter) Ultium Cells plant in Spring Hill, Tennessee, expected to begin production later this year.
  • $2.6 billion investment in the Ultium Cells plant, a joint venture between General Motors and LG Energy Solution.
  • 1,700 people expected to be employed in the plant once it is operational.
  • 70% of batteries for electric vehicles currently produced in China.
  • Up to $7,500 tax credits available for eligible electric vehicles, including the Cadillac Lyriq and Tesla's Model Y.
  • Retail price cap for eligible electric vehicles raised to $80,000 from $55,000.

Sources:

  • [Source: Reuters, 2023.02.08]
  • [Source: The New York Times, 2023.02.08]
  • [Source: U.S. Department of the Treasury, 2023]
  • [Source: Bloomberg, 2023.02.07]
  • [Source: CNBC, 2023.02.06]