From Challenge to Consensus? The Politics of the European Union’s Response to the U.S. Inflation Reduction Act and the Green Deal Industrial Plan

The Inflation Reduction Act (IRA) sent shockwaves through Europe, intensifying the urgency for a unified industrial strategy while exposing deep divisions among EU Member States over the appropriate course of action. This paper investigates these divisions by tracing and analyzing the EU-level policymaking processes between the adoption of the IRA by the United States in August 2022 and the European Commission’s presentation of the Green Deal Industrial Plan in February 2023. It examines how diverse actors framed and addressed the opportunities and challenges posed by the IRA, focusing on the debates and processes that culminated in a collective industrial policy response. Drawing on official EU documentation, stakeholder materials, press reports, secondary literature, and semi-structured interviews with policymakers and stakeholders, this study offers a detailed exploration of the factors that shaped the EU’s response to intensifying global economic competition in clean technologies. The paper addresses three central questions: (1) How did the EU, as both a supranational political entity and a union of Member States, react to the IRA and its perceived threats and opportunities? (2) What arguments and visions regarding the EU’s response to the IRA emerged, and how did they compete or align? (3) Why did the EU’s response ultimately materialise as the Green Deal Industrial Plan? These questions intersect with broader academic and policy debates about the resurgence of industrial policy in the EU and its interactions with domestic and international politics. The analysis highlights several key themes. First, it identifies tensions between short-term political pressures to safeguard European industries and longer-term goals of competitiveness and strategic autonomy. Second, it underscores the critical role of the Franco-German couple in shaping both the European policy debate and outcomes in these issues. In addition to Franco-German dynamics, the paper examines the role of intra-Commission conflicts, particularly between the European Commission’s Directorate-General for Competition and the Directorate-General for the Internal Market, which reflected broader disagreements over economic visions. Finally, it explores core-periphery dynamics within the EU, emphasizing concerns from less economically dominant Member States about the adequacy and equity of the EU’s response. By detailing these dynamics, the paper contributes to understanding the institutional and political conditions that enable and constrain the formulation of a common EU industrial policy. It demonstrates how external pressures, such as the IRA, can act as catalysts for advancing industrial strategies in a turbulent geopolitical landscape, while simultaneously exposing structural tensions within the EU’s political system.