The UK's response to President Biden’s Inflation Reduction Act, a $369 billion green investment subsidy legislation, is causing concern among critics who believe the country is falling behind in the global race to cut carbon emissions. Finance Minister Jeremy Hunt has been under scrutiny for his decision to offer subsidies on a case-by-case basis or through competitive grants, rather than large-scale subsidies like the U.S.
Economists criticized Britain's one-on-one agreements with Tata Steel and Tata Group as "parasitic" and lacking vision. The Inflation Reduction Act aims to meet climate challenges and expand the economy, but there are concerns about its potential to lure companies, money, and jobs away from other countries.
Despite legislating a net-zero greenhouse gas emissions target by 2050, Britain has faced accusations of backsliding on its green commitments. This sentiment was reinforced when Finance Minister Hunt announced a rollback on some net-zero targets citing cost concerns.
The Climate Change Committee has claimed that Britain has lost its global climate leadership. Lobby groups like Cleantech for UK argue that while the government has made exciting announcements, there is no clear delivery plan. The lack of a planned industrial strategy is seen as Britain's Achilles' heel by Make UK, a trade group that represents manufacturers.
Investors such as Impax Asset Management have expressed agreement with the restrained approach to subsidies given Britain's high debt levels. However, the Inflation Reduction Act and the CHIPS Act have already drawn investments to the U.S., with British firms like Pragmatic Semiconductor and Johnson Matthey (LON:JMAT) capitalizing on these acts.
Drax, a power generator, paused a multibillion-dollar carbon capture investment in Britain due to opportunities created by the Inflation Reduction Act. The risk of losing more companies to foreign investment is a concern for Britain. The U.K. Infrastructure Bank provides financial support for companies in this regard, and Hydrogen UK has expressed concern about the country's stalling hydrogen industry amidst global competition.
Britain acknowledges it cannot match the scale of American subsidies but assures that its response will be ongoing and appropriate. Despite the challenges, the UK government remains committed to its green initiatives, albeit in a more restrained manner than its American counterpart.
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