The IRA, enacted by the Biden administration in 2022, is a groundbreaking legislative initiative to reduce global greenhouse gas emissions. It introduces substantial reforms to the American tax system, offering significant subsidies to companies investing in green technologies. Projections estimate the funding impact to range between USD 800 billion and USD 1.2 trillion, positioning the U.S. to achieve a 50% emissions reduction by 2030 compared to 2005 levels.

The EU's response, including the Green Deal Industrial Plan (GDIP) and the Net Zero Industry Act (NZIA), lacks a unified strategy and faces political constraints. The absence of new EU funds in the NZIA has prompted member states to rely on existing instruments, risking internal competition and market distortions. The fragmented industrial policy exposes vulnerabilities, and without a coherent EU-level strategy, the diversion of investments towards the U.S. is likely to continue.