European Commission President Ursula von der Leyen said Brussels must respond to the challenge presented by US green subsidies and swiftly push through a law on phasing out combustion engines from 2035.

Speaking to reporters on Sunday, after joining with Germany’s Chancellor Olaf Scholz and his Cabinet at an annual retreat near Berlin, Von der Leyen said the US Inflation Reduction Act, or IRA, would mean large tax exemptions for any green technologies manufactured in the United States.

“We have discussed our answers: negotiations with the US about interpreting the law, investments of our own, and speedier processes,” she said.

She noted that European Union law due within the next two weeks will release aid for the bloc’s green transition. She described shortages of specialized labor in the sector as a “brake on growth”.

The EU’s climate policy goals seek to cut greenhouse gas emissions from the transport sector to meet the bloc’s target of becoming climate neutral by 2050.

Von der Leyen traveled to Berlin seeking to lift a German block on proposed EU law that would ban the sale of petrol or diesel cars from 2035, reported Reuters news agency.

Scholz said on Sunday that he supported his Transport Minister Volker Wissing’s threat to block the final vote on the EU’s ban on combustion engine vehicles.

A final vote by EU ministers that had been set for Tuesday has been delayed.

Last week, Wissing said Germany was “not in a position to vote in favor” of an EU agreement that would bring a de facto ban and he argued that the bloc must be cautious about imposing solutions on the industry. “We are in agreement on this issue,” said Scholz.

Synthetic alternative

Wissing is pushing for a loophole in the final EU legislation, on how to permit e-fuels, a synthetic alternative to gasoline, reported the Politico news website.

Von der Leyen said the issues could be resolved and that she fully supported the “principle of technology openness”, but added that this must be balanced with policy targets.

“It has to be in balance with our climate goals on which there is an agreement,” she said. “The discussion is constructive.”

Scholz added: “This is such a solvable task that we are all quite confident.”

Von der Leyen said a solution must be found to allow auto manufacturers time to plan for the phaseout. She added: “We need to focus on the fact that in the future we’ll maintain our position as a world leader in clean energy.”

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