By David Lawder
SPRING HILL, Tenn. (Reuters) -U.S. Treasury Secretary Janet Yellen touted clean energy investments on Wednesday at a Tennessee electric vehicle battery plant benefiting from tax incentives in President Joe Biden's signature climate legislation, adding that she supports Europe's plans for competing subsidies.
Yellen told reporters at the Ultium Cells LLC factory under construction near Nashville that the United States and Europe needed to work together to lessen their dependence on China for EV batteries and critical minerals.
"If Europe takes action to put in place subsidies similar to ours, this is good climate policy. And there's plenty of business for all of us to be able to benefit from the clean energy transition," Yellen told reporters.
Her trip to the Ultium plant, a joint venture of General Motors (NYSE:GM) and LG Energy Solution, comes a day after she heard more pleas from French and German ministers not to exclude their companies from tax incentives in the Inflation Reduction Act.
In his State of the Union address Tuesday night that served as blueprint for an expected 2024 re-election bid, Biden said the act, passed only by his fellow Democrats last year, would help rebuild the U.S. manufacturing base. Biden also touted bipartisan infrastructure and semiconductor investment laws.
"We're going to make sure that the supply chain for America begins in America," Biden said.
The 2.8 million-square-foot (260,130-square-meter), $2.6 billion Ultium Cells plant in Spring Hill, Tennessee, is set to begin production later this year, and is the second of three planned Ultium JV plants. It is expected to eventually employ 1,700 people and will produce cells for the Cadillac Lyriq sport-utility vehicle, which is assembled at a nearby GM plant.
EUROPEAN COMPLAINTS
European and Asian allies have complained that the Inflation Reduction Act's tax subsidies will pull green investments away from their regions toward the United States. The European Union is readying competing incentives, and French Finance Minister Bruno Le Maire told reporters on Tuesday in Washington that U.S. officials agreed that the two sides should be transparent about their subsidies.
Le Maire also said that U.S. rules on the tax credits, now being finalized by Yellen's staff, should be made available to a "maximum" of European components.
The U.S. Treasury has already tweaked some rules to make more electric vehicles eligible for up to $7,500 tax credits -- including the Lyriq -- by revising how they are classified.
The Treasury drew the ire of Senate Energy Committee Chair Joe Manchin after the department said it would not issue proposed guidance on battery sourcing rules until March, effectively giving some EVs not meeting new requirements a few months of eligibility in 2023 before the rules take effect.
The tax incentives are designed to shift the U.S. battery supply chain away from China. China currently produces 70% of batteries for electric vehicles, the Treasury said.
Asked whether U.S.-Chinese joint ventures would be given access to the tax credits, Yellen said she would have to look more deeply into the details of the guidance expected in March.