The case against Europe matching Biden’s green subsidy splurge

Press quote (Financial Times)
12 June 2023

There’s an interesting new paper out on EU subsidies from John Springford and Sander Tordoir at the Centre for European Reform urging restraint. They make a few key points: The EU is already pretty competitive in global green tech exports — less so than China but much more so than the US. The EU has been importing green goods because domestic demand has been growing so quickly, but markets are maturing: the authors reckon the EU should be supplying enough EV batteries to meet its domestic demand by 2030.

Relatedly, the distance effect (that is, far-flung economies trade less) in green goods exports is asserting itself. EVs and particularly their batteries are heavy: it makes sense to produce them close to the consumer. EVs for Europeans will mainly be made in Europe.

Finally, if you’re going to subsidise, better to do it with very immature technologies to build an early advantage, such as green hydrogen, not established sectors such as EVs.