How do Europe and the US compare on clean tech?
As the world moves beyond fossil fuels, clean technologies will shape new economic and energy systems. To assess the relative positions of the United States and European Union, we must evaluate both deployment and manufacturing.
The EU leads the US on deployment, being home to more wind turbines, solar panels, hydrogen electrolysers, batteries and electric vehicles. Meanwhile, China has deployed more than the combined sum of the EU and US.
For manufacturing, the US has greater solar panel production capacity than the EU, while the EU leads in terms of wind turbine and electric vehicle production. Both have similar manufacturing capacities for batteries.
Deployment is crucial for decarbonisation, energy security and affordable energy – both the EU and US (though this may change under President Trump) increasingly wish to boost domestic manufacturing of clean technologies to counter perceived overdependence on imports, and as a way to boost domestic economic growth.
To do so, the US passed the Inflation Reduction Act (IRA) in 2022, providing large subsidies for manufacturing projects. This has been crucial in turbo-charging investments – battery manufacturing investments have grown from $2 billion to $12 billion quarterly. The translation of these investments into future capacities and jobs is threatened by the current US administration’s attempts to repeal the IRA.
Meanwhile, the EU has set a target to manufacture 40% of its clean tech demand domestically. A permissive state aid regime and targeted use of revenues from the EU's carbon market are being used to support domestic manufacturing projects. Crucially, the EU is also leveraging the power of its large domestic market. Emission standards for newly registered vehicles have driven large investments into electric vehicle manufacturing – keeping pace even with US investments supported by IRA subsidies.
Read the four-part Analysis series co-authored by Bruegel and Rhodium Group.
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