European Union leaders say the US legislation will unfairly benefit American firms and violate World Trade Organisation rules. To date, Prime Minister Rishi Sunak’s administration has stayed relatively quiet on the issue, despite recent warnings from inside his own Conservative Party that the UK risks missing out on the economic opportunities of the green energy transition. 

But at the World Economic Forum in Davos, Switzerland, Shapps on Thursday indicated that Britain shares EU concerns while appearing reluctant to respond with its own protectionist measures.

“It’s very important we don’t slip into protectionism and that is where at the edges, the Inflation Reduction Act in the US is dangerous because it could slip into protection,” Shapps said in a panel discussion. 

“It’s not its intention, I don’t think it’s necessarily where it is going but if it’s not amended… I think that’s where we have to be really careful.”

Why Europe is fuming over America’s green subsidies: QuickTake

The legislation, a key component of Biden’s agenda, includes energy tax credits, climate programs and environmental mandates which European leaders are concerned will lure investment that would otherwise flow to Europe. This month, European Commission president Ursula von der Leyen responded by unveiling a “Net-Zero Industry Act” aimed at increasing funding for green technologies. 

The UK, meanwhile, is continuing to express its concerns privately to the US. In an interview with Bloomberg TV later on Thursday, Shapps said that while he welcomes large parts of the legislation and recognizes “the US has a lot of catching up to do,” some of it is “not just anti-competitive, but protectionist”. 

Shapps said he’s met with US Climate Envoy John Kerry and is hopeful the UK’s concerns will be resolved. Trade Secretary Kemi Badenoch also met her US counterpart on Wednesday to discuss concerns about a global subsidies race and agreed to keep a close dialogue to mitigate the act’s impact.

Opposition Labour Party leader Keir Starmer and shadow Chancellor Rachel Reeves also expressed their party’s concern at the impact of Biden’s bill this week. 

“We see what’s going on in America, we see the early evidence of what’s going on in Europe – we need that in the UK as well,” Starmer told a panel in Davos on Thursday. Labour’s shadow climate minister Ed Miliband also cautioned that the UK cannot afford to be “bleating on the sidelines” on this issue.

Starmer proposed a Clean Power Alliance to counter the influence of the OPEC+ oil cartel, with countries sharing information and investment as they forge a path to so-called net zero carbon emissions. “It’s very easy to retreat and see challenges – I think it should be a catalyst for all of us,” he said. BM/DM