What Can the EU’s ‘Made in/with Europe’ Debate Learn from the U.S. Inflation Reduction Act?
Dominic Gogol, Director of Advocacy Initiatives and Jenny Stanley, Manager, Responsible Policy Engagement
The EU’s proposed Industrial Accelerator Act is expected to include ‘Made in Europe’ or ‘Made with Europe’ provisions for key sectors, products and materials. How the EU designs these will determine how well it captures the opportunity of the global transition to clean electrification. As policymakers finalize details, we share four lessons from the ‘Made in America’ conditions of the U.S. Inflation Reduction Act (IRA)’s tax credits for domestic content requirements.
The European Commission is expected to publish its Industrial Accelerator Act (IAA) proposal next week – part of a package of measures aimed at boosting the bloc’s global competitiveness through the Clean Industrial Deal. ‘Made in Europe’ requirements for public procurement and subsidies in key industrial sectors are widely anticipated, with the aim of supporting EU-made products amid growing Chinese and U.S. clean technology investments. Once the draft IAA is published, the official political negotiations will commence, as EU Member States work to reconcile competing national interests in pursuit of a common ruleset that strengthens the bloc.
This is a complex piece of legislation, and one EU leaders know they need to get right. The global transition to clean electrification can unleash major industrial investments, job creation and community benefits. Those gains will flow to regions offering the clearest, most durable investment case. How the ‘Made in Europe’ provisions are designed will play a key role in deciding whether Europe captures that opportunity or watches it land elsewhere.
As we await the IAA proposal from the European Commission, we looked across the Atlantic for a recent experiment in domestic content policy in manufacturing: the U.S. Inflation Reduction Act (IRA). Passed in 2022, the IRA catalyzed $500 billion in clean energy investment and helped U.S. clean energy manufacturing grow significantly. The original IRA design, and its recent changes under the One Big Beautiful Bill Act (OBBBA), are a valuable case study.
How the IRA structured domestic content
The IRA embedded domestic content requirements on both sides of the market. Supply-side production tax credits rewarded companies for manufacturing clean energy components on U.S. soil. Demand-side consumer credits were conditional on meeting ‘Made in America’ battery and critical mineral sourcing thresholds. It was less a hard mandate and more a layered incentive structure designed to tilt investment decisions.
Rather than uniform rules, the IRA’s domestic content framework was calibrated to market readiness in different sectors. Steel and iron faced an immediate 100% domestic sourcing requirement because robust U.S. capacity already existed. For manufactured components like solar panels, wind turbines and battery systems, the thresholds started lower and tightened progressively over time as supply chains scaled.
The IRA also extended flexibility to allies. Critical minerals sourced from countries with a U.S. free trade agreement counted toward EV domestic content thresholds, effectively rewarding supply chain rerouting through partners like Canada, Mexico, Australia and South Korea. While favored trading partners were drawn closer into U.S. supply chains, the Foreign Entity of Concern (FEOC) restrictions locked out the other end of the spectrum, barring EV credits where battery components or critical minerals were sourced from China, Russia, Iran or North Korea. Both levers were phased in, giving manufacturers a runway to adjust. But together they reflect a deepening integration with trusted partners while severing dependencies on adversarial ones.
Domestic content rules were a consequential part of the IRA, but not the whole story. Importantly, those provisions sit alongside a much larger package of incentives and support.
The IRA’s clearest success story: EVs and battery manufacturing
The US EV market provides the most compelling evidence of where the IRA’s domestic content design worked. Access to the $7,500 consumer credit was contingent on automakers meeting battery and critical mineral sourcing thresholds.This demand-side condition drove a significant manufacturing response.
Nearly $100 billion in battery and EV manufacturing investments were announced as a result. Ford established a joint venture with a South Korean battery maker and planned to invest $11.4 billion to build battery plants in Tennessee and Kentucky. Hyundai accelerated the construction timeline of its $7.6 billion Metaplant America facility in Georgia.
The consumer credit created a commercially meaningful price advantage for compliant EV vehicles, giving manufacturers a strong business case for investing in U.S.-based supply chains. The demand signal was compelling enough, at the time, to justify billions of capital commitments.
When the incentive stack unravels
The passage of the OBBBA in 2025 made significant changes to the structure of the IRA credits on both the demand and supply side. The EV consumer tax credits were repealed seven years early and many of the other manufacturing credits that rewarded domestic production of wind, solar and battery components were revised.
It also introduced much tighter FEOC restrictions that limit companies with material ties to China from redeeming certain credits, a significant compliance burden given how deeply Chinese materials are embedded in global clean energy supply chains.
As a result, the demand-side signal that gave manufacturers the confidence to invest was weakened. The investment response has been swift. Ford and the South Korean battery company dissolved their joint venture, with Ford citing that it no longer required the production capacity it had committed to build. Across 2025, companies cancelled or downsized $35 billion in clean energy projects, far outpacing new investment announcements.
A domestic content requirement, stripped of the demand incentive it was attached to, loses much of its power to drive investment. Content rules tell manufacturers where to source; demand incentives give them a reason to invest at scale.
Lessons from the IRA’s ‘Made in America’ provisions for the IAA and ‘Made in Europe’
1. Domestic content rules need to be part of a full incentive stack.
The IRA’s content provisions worked because they sat on top of production credits, investment credits, concessional loans and consumer incentives. The demand-side signal gave manufacturers the commercial case to invest, and the supply-side credits made domestic production economically viable. When that full stack was later dismantled, as the OBBBA experience shows, investment commitments unwound quickly. Content rules alone, without equivalent incentive depth, appeared insufficient to sustain capital commitment at scale.
2. Allied sourcing builds resilience; rigid origin rules raise costs.
The IRA allowed critical mineral sourcing from free trade agreement partners because domestic processing capacity was limited or non-existent, effectively rewarding supply chain rerouting through allies rather than insisting on purely domestic sourcing. The subsequent tightening under the OBBBA’s FEOC restrictions has introduced compliance complexity. The original IRA design suggests that allied sourcing can build supply chain resilience without the investment friction that strict origin rules tend to create.
3. Calibrate requirements to supply chain readiness.
The IRA’s domestic content framework was phased in progressively, designed to grow alongside domestic capacity rather than require it upfront. This sequencing meant requirements tracked supply chain reality closely enough to avoid either blocking deployment or triggering waivers at scale. In the EU context, as the Draghi review makes clear, sectors are at very different points on that curve: wind retains meaningful European manufacturing depth, while solar domestic capacity remains well below what deployment demands. A single headline ‘Made in Europe’ threshold applied uniformly across sectors and components would face the same tension the IRA sought to navigate: set too low, it doesn’t move investment; set too high, it can’t be met.
4. Support provisions with clear guidance and administrative simplicity.
Some of the IRA’s domestic content bonus credits were initially burdensome to claim, requiring significant cost data to prove compliance. Regulators had to iterate through multiple rounds of guidance, ultimately introducing safe harbors with default cost percentages to make the credits easier to claim, which were finalized two years after the IRA’s passage – a lag that created uncertainty during the critical early investment window. Implementation design and industry engagement are factors that can shape how quickly the domestic content considerations can translate into investment confidence.
Making sure the business perspective is heard
European companies across the clean energy value chain can offer valuable insights and feedback on how ‘Made in Europe’ content provisions may affect investment decisions, supply chains and costs. That perspective is going to be valuable for policymakers as the IAA proposal progresses.
Industrial policy is shaped by who shows up: through direct engagement with policymakers, trade associations, and other coalitions that translate business experience into policy preferences. Our Responsible Policy Engagement framework helps companies do exactly that – turning climate ambition into credible, consistent advocacy.
Businesses that want a competitive, climate-aligned industrial strategy in Europe should make themselves heard. Throughout the progress of the IAA, we will be partnering with CLG Europe to mobilize the voice of leading European industry companies.