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How Much Could the US Inflation Reduction Act Cost Europe?

Eszter Hargita, Filip Puzder, Péter Staviczky


Keywords: inflation reduction act, IRA, subsidy competition, incentive effect, operating aid, battery manufacturing, tax credit

The Inflation Reduction Act (IRA) was introduced in the US in August 2022, aiming to promote investments into clean energy production. The IRA provides huge amount of aid, which can have a draining effect of green investments vital for the green transition of the European economy. In response, the Commission adopted Temporary Crisis and Transition Framework (TCTF) in March 2023. As well as explaining the historical context and content of these subsidy-rules, this article makes an attempt to compare the subsidies available under the IRA and the TCTF, considering the maximum aid amount available under the regional aid guidelines.
Keywords: Inflation Reduction Act; IRA; subsidy competition; incentive effect; operating aid; battery manufacturing; tax credit

Eszter Hargita is working for the Hungarian State Aid Monitoring Office within the Prime Minister's Office (SAMO). The opinions expressed in this article are not the official position of the SAMO. Filip Puzder is a manager at Ernst & Young Consulting Ltd (EY) in Hungary, and is the leading State Aid Expert with EY Hungary. The views expressed in this article do not represent the official position of EY. Péter Staviczky is an attaché responsible for State aid at the Hungarian Permanent Representation to the EU. The opinions expressed in this article are not the official position of the Hungarian Permanent Representation to the EU. The authors would like to thank Phedon Nicolaides, the Academic Director at Lexxion Training, for his assistance in the preparation of this article. An earlier and shorter version of this article was published in the Hungarian State Aid Law in Hungarian: Eszter Hargita and Filip Puzder, ‘Mennyibe kerülhet Európának az amerikai inflációcsökkentési törvény? (How much the Inflation Reduction Act of the US could cost to Europe?)’ (2023) 39(2) State Aid Law, 12.


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