One year of subsidy wars

It’s been about a year since a pair of US laws triggered a flood of financial incentives for investments in clean energy production and semiconductor manufacturing in the US. 

Let’s look back on the irrevocable change they’ve wrought. 

Driving the news: Since their inception, the CHIPS Act and the Inflation Reduction Act (IRA) have effectively stoked a global subsidy war, with the US, Canada, and Germany all throwing billions at companies to accelerate high-tech investments in key industries.

  • Last week, Germany convinced chipmaker TSMC to build a factory in the country by reportedly offering €5 billion. In June, Intel was offered €10 billion to build one too.

Why it matters: Per The Wall Street Journal, this “new world order” is already creating winners and losers, with smaller economies poised to fall behind as they fail to compete with the ludicrous sums offered by the US. This list of losers could come to include Canada

  • A report from earlier this year found the US can offer much larger and more reliable subsidies in sectors like battery materials, hydrogen production, and carbon capture. 

Bottom line: And for the handful of countries that can keep up, some research has found that policies that heavily subsidize manufacturing could do more economic harm than good.—QH