Jeremy Hunt
Hunt said he’d been waiting to see the European Union’s response before making a final decision. Image Credit: Bloomberg

London: Jeremy Hunt said the UK is considering subsidizing clean energy firms to combat the threat from US President Joe Biden’s Inflation Reduction Act, despite previously indicated opposition to that approach.

“We understand that subsidies have a role,” the Chancellor of the Exchequer said at the British Chamber of Commerce’s annual conference in London on Wednesday. “We will make sure that we remain competitive.”

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Biden’s policy, which offers subsidies and tax credits to US firms to promote green technologies, has angered governments in Europe and Asia who say it risks cutting them out of the US market, especially for automobiles. Earlier this year, UK Cabinet minister Grant Shapps said the IRA is “dangerous” because it risks triggering a race to protectionism.

Hunt said the government is considering how it will respond and will provide an update by the fall. He said he’d been waiting to see the European Union’s response - they announced a Green Deal Industrial Plan in February involving investment aid and tax credits for firms - before making a final decision.

Sectors such as battery production, hydrogen, and carbon capture, usage and storage will get “maximum possible support from the government,” Hunt said. “Those are very strategic sectors for the UK.”

The calls for state help were highlighted this week by Stellantis NV, the maker of Vauxhall and Peugeot cars, which warned that assembling cars in Britain is at risk of becoming too expensive due to new post-Brexit trading rules.