Certain provisions in U.S. President Joe Biden's landmark climate action plan, the Inflation Reduction Act (IRA), have provoked strong responses from the EU, which fears it could hurt its industry.

The IRA, a behemoth piece of legislation that largely focuses on climate and social spending, provides more than $430 billion in U.S. investments.

Some of the investments are in the form of tax cuts for companies that invest in clean energy, but there are also significant subsidies for electric vehicles, batteries and renewable energy projects, provided they are manufactured in the United States.

The IRA has caused a stir at the EU's headquarters in Brussels as well as in other European capitals, which see the various subsidies as "discriminatory," particularly against the bloc's auto manufacturers.

"This is unacceptable for the EU. As it stands, this text is extremely protectionist, to the detriment of European exports," said Czech Industry Minister Jozef Sikela, whose country currently holds the rotating EU presidency.

In early November, EU Internal Market Commissioner Thierry Breton threatened to "go before the WTO" and consider "retaliatory measures" if the U.S. did not reverse its subsidies.

"In some cases, the subsidies that the Biden administration offers are four to ten times the maximum amount authorized by the European Commission," said French Finance Minister Bruno Le Maire, who called on the Commission to create "European preferential measures or to accelerate the use of reciprocity instruments."

The U.S. is hoping to smooth things over with its European partners.

After a virtual exchange with France's Le Maire, U.S. Trade Representative Katherine Tai on Monday said that the countries are "working together to strengthen common understanding of legislation."

(Source: AFP with edits)