EU Eyes Hydrogen Tax to Counter US Inflation Reduction Act

Bernd Lange, the head of the European Parliament’s trade committee, has suggested implementing taxes on US-produced hydrogen.

This proposal comes in response to the controversial €370 billion US Inflation Reduction Act (IRA), which aims to boost green investments. The IRA, offering subsidies and tax credits for clean tech producers like hydrogen, wind turbines, and electric vehicles, has been criticized by EU lawmakers for its “Buy American” clauses that favor domestic production.

Lange is advocating for a more assertive EU trade policy, amid the IRA’s provisions that provide tax credits for hydrogen production – an essential energy carrier and crucial for low-carbon steel production. Additional subsidies are often available for regional production sites in the US. Lange pointed out at a conference organized by the German trade union IG BCE, “If you produce hydrogen in Texas now, then first you get the infrastructure subsidized. If you install additional wind energy, another subsidy, and production is subsidized for ten years, which we don’t do at all in Europe.”

With this triple subsidy, the US aims to achieve a hydrogen price of $2 per kilogram, which, compared to Europe’s current €9, Lange deems unacceptable. He stated, “Therefore, we will tell our American friends that we will not accept these illegal subsidies – which are also illegal within the WTO framework – and we will initiate anti-dumping measures accordingly.”

Anti-dumping measures, or tariffs imposed on imported goods sold below “normal value”, can be imposed by the EU under international trade rules. Lange suggests that these tariffs may need to be imposed on US hydrogen imports, similar to the EU’s approach with China and state-owned enterprises’ products and services.

Lange concluded by emphasizing the need for the EU to be more assertive, stating that the EU was too open about its market situation in the past. Currently, the EU imposes five anti-dumping measures on products from the US, compared to 96 such tariffs on products from China, according to the 2022 annual report.