Biden and EU leader to try to resolve spat over electric vehicle tax credits

President Joe Biden and European Commission President Ursula von der Leyen are expected to outline a plan Friday that the White House hopes will turn the page on a spat between the two over electric vehicle tax credits.

According to administration officials who spoke on the condition of anonymity before the leaders met, Biden and von der Leyen are expected to agree to open negotiations between the U.S. and the EU on a deal that could boost the use of European minerals critical in the production of electric vehicle batteries that are eligible for U.S. tax credits through Biden’s roughly $375 billion clean energy law that passed last year.

The agenda for their Oval Office meeting also includes Western coordination to support Ukraine in the war against Russia, joint efforts to decrease Europe’s dependence on Russian fossil fuels and the Biden administration’s growing concerns that China is considering providing weaponry to Russia for use in the war.

The Treasury Department said in a statement that an agreement “with like minded partners” could help provide a measure of “security and stability by ensuring the United States and allies and partners are not reliant on China for critical minerals.” White House officials hope an agreement with the EU can be reached soon, but also plan to consult members of Congress, labor groups and others with a stake in the outcome.

Von der Leyen and other European leaders have voiced opposition to incentives in the Inflation Reduction Act that Biden signed in August that favor American-made electric vehicles. The legislation stipulates that for U.S. consumers to be eligible for a tax credit of up to $7,500 on their EV purchase, the EV’s battery must largely contain minerals from the U.S. or a country with which the U.S. has a free-trade agreement. Additionally, 50% of components in batteries must be manufactured or assembled in North America by 2024, with that percentage rising gradually to 100% by 2028.

“Getting on the same page on the effort to diversify supply chains on electric vehicle batteries is an important step for U.S.-EU relations, and any steps that avoid a subsidy war are meaningful,” said James Batchik, assistant director of the Europe Center at the Atlantic Council. “That said, a resolution will depend on the details of any future agreement.”

Mr. Biden stood by the policy that favors American EVs when French President Emmanuel Macron, a critic of the legislation, visited Washington late last year. But he also acknowledged “glitches” in the legislation and said there were “tweaks we can make” to satisfy allies.

Ensuring access to critical minerals is a key element of the administration’s efforts to promote American electric vehicle manufacturing and other clean energy technologies.

Mr. Biden last year announced he was using the Defense Production Act to boost production of lithium and other minerals used to power electric vehicles. Experts said the move by itself is unlikely to ensure the robust domestic mining the Democratic president seeks as he promotes cleaner energy sources.

His order directed the Defense Department to consider at least five metals — lithium, cobalt, graphite, nickel and manganese — as essential to national security and authorizes steps to bolster domestic supplies.

The U.S. and the EU have remained largely in lockstep throughout the Russian war, coordinating sanctions against Moscow and the delivery of weaponry to Kyiv. The leaders are expected to use Friday’s Oval Office meeting to spotlight that Western unity.

Mr. Biden is also expected to raise U.S. intelligence findings that show that China is considering sending weapons to Russia to help prosecute the war in Ukraine.

The White House says Beijing has yet to deliver weapons to Russia but is more seriously weighing the prospect as Russia has burned through ammunition in a conflict that has gone on much longer than Russian President Vladimir Putin anticipated.

European nations have had a less adversarial relationship with China than the U.S. has, but that has been evolving since the start of the war.

This week the Dutch government announced it would join the U.S. in imposing export restrictions aimed at limiting China’s access to materials used to make advanced processor chips. In a speech before the German parliament last week, Chancellor Olaf Scholz called on China to “use your influence in Moscow to press for the withdrawal of Russian troops, and do not supply weapons to the aggressor Russia.”

A European official, who was not authorized to comment publicly and insisted on anonymity, said that Western allies are taking seriously U.S. warnings that China could be edging toward sending Moscow arms, because many of the publicized U.S. intelligence findings throughout the war have proved to be true.

The official, however, noted that reputational — and potential economic — costs of providing weapons to Russia seem to outweigh any benefits for Beijing.