In Mo i Rana, a small Norwegian industrial town on the cusp of the Arctic Circle, a cavernous gray factory sits empty and unfinished in the snowy twilight — a monument to unfulfilled economic hope.
The electric battery company Freyr was partway through constructing this hulking facility when the Biden administration’s sweeping climate bill passed in 2022. Perhaps the most significant climate legislation in history, the Inflation Reduction Act promised an estimated $369 billion in tax breaks and grants for clean energy technology over the next decade. Its incentives for battery production within the United States were so generous that they eventually helped prod Freyr to pause its Norway facility and focus on setting up shop in Georgia.
The startup is still raising funds to build the factory as it tries to prove the viability of its key technology, but it has already changed its business registration to the United States.
Its pivot was symbolic of a larger global tug of war as countries vie for the firms and technologies that will shape the future of energy. The world has shifted away from decades of emphasizing private competition and has plunged into a new era of competitive industrial policy — one in which nations are offering a mosaic of favorable regulations and public subsidies to try to attract green industries like electric vehicles and storage, solar and hydrogen.
Mo i Rana offers a stark example of the competition underway. The industrial town is trying to establish itself as the green energy capital of Norway, so Freyr’s decision to invest elsewhere came as a blow. Local authorities had originally hoped that the factory could attract thousands of employees and new residents to their town of about 20,000 — an enticing promise for a region struggling with an aging population. Instead, Freyr is employing only about 110 people locally at its testing plant focused on technological development.
“The Inflation Reduction Act changed everything,” said Ingvild Skogvold, the managing director of Ranaregionen Naeringsforening, a chamber of commerce group in Mo i Rana. She faulted the national government’s response.
“When the world changes, you have to adapt,” she said, “and we haven’t been efficient enough in our response to the I.R.A.”
A Clean Energy Race
The implications extend beyond Mo i Rana. There is a growing sense that both the European Union and Norway, which is not an official member but which follows many of the E.U.’s policies, could fall behind in the sprint for clean energy.
The batteries that are essential for green energy grids and electric cars offer an important case study. China has 80 percent of the world’s capacity to produce batteries. That has left nations with “an increasing sense of vulnerability over concentration of supply,” said Antoine Vagneur-Jones, the head of trade and supply chains at Bloomberg New Energy Finance.
Timing is critical. The nations and companies that build up capacity first could snap up critical minerals and talent, pulling so far ahead that it is hard to catch up.
Companies were steadily adding battery capacity to the pipeline in Europe before the announcement of the Inflation Reduction Act in August 2022, tracking of company announcements by Benchmark Mineral Intelligence shows. But after the law was announced, European capacity largely plateaued and expected U.S. capacity shot up and eventually overtook it.
“This is extremely fast that you’re starting to see these effects,” said Fredrik Persson, the president of BusinessEurope, the continent’s largest business group.
He said businesses were being driven by a variety of factors, including higher energy prices and more red tape in Europe, and greater certainty in the United States about the future of the clean energy market.
For countries like Norway, falling behind could mean remaining economically dependent on an oil and gas sector that appears headed for decline as the world pivots toward clean power.
“We see on the horizon that oil and gas will be going down,” said Ole Kolstad, the administrative director at Rana Utvikling, a business development office in Mo i Rana. “We have to be part of that transition.”
An Industrial Town
Mo i Rana is no stranger to shifts in global industrial development — swings between state help and free-market principles have been central to its own story.
The town’s industrial legacy started in earnest in the early 1900s, when a company with ties to the American inventor Thomas Edison built up infrastructure and constructed a railroad to what was then a small mining settlement.
After World War II, the Norwegian government — looking to secure a homegrown supply of steel — built a large state-run ironworks in Mo i Rana, bringing jobs and a population explosion with it.
But the era of state-subsidized industry came crashing down in the 1970s, when a production glut lead to crashing steel prices. By the late 1980s, the Norwegian government had decided to privatize production in the Arctic Circle town.
Norway carefully managed the transition. A national library was set up, creating public sector jobs (it uses the mountains bordering the local fjord for naturally climate-controlled book storage). The government helped to re-educate steelworkers for new roles.
Still, the local population never grew far beyond its 1970s peak. As local development authorities try to attract and retain young people and secure future growth, they see sustainable energy as crucial.
“We want to be Norway’s green energy capital,” Geir Waage, the mayor, said during an interview in his office.
He pointed to a slide show he uses to promote the town and its green energy ambitions and ticked through the town’s attributes. In addition to its proximity to key minerals and an industrial work force, Mo i Rana also offers cheap and green electricity thanks to hydropower fueled by snow melt, glacial runoff and the waterfalls that cascade through its craggy mountains.
Mr. Waage has had practice at the pitch. Officials in Mo i Rana are talking with national authorities to come up with a competing framework to America’s policies — part of a larger push happening across Europe and the world as local authorities and companies scramble to respond to the Inflation Reduction Act.
But unlike the 1950s or even the 1980s, when state policies swooped in to help usher the Mo i Rana economy into a new era, some fear that this time, Norway’s national government may not come through.
A Global Subsidy Push
Most capitalist countries have spent recent decades trying to even out competitive playing fields and tearing down, not erecting, barriers to trade. But then the Trump administration imposed steep tariffs — including some directed at allies in Europe and elsewhere. And the Biden administration upped the ante with its climate bill, giving preference to some American-made products and trying to spur domestic production.
The recent turn toward more protectionist policies aimed at building up national industries has presented a particular conundrum for the European Union, which sees the principles of fair and open trade as critical to its project of European integration.
European officials have long tried to discourage their individual member countries from competing with one another for company investments and provoking an expensive subsidy war. They are also enthusiastic supporters of similar principles at the World Trade Organization, which requires its members to treat all foreign and local goods equally to try to eliminate hidden barriers to trade.
But the resurgence of targeted subsidies in the United States and elsewhere is testing commitments to those rules.
America’s generous new production tax credit is predictable, is ongoing and applies across the board, offering companies attractive stability. Other nations have offered their own generous incentives, including tax credits in Canada and proposed battery subsidies in India.
Within Europe, such measures have set off a debate about whether countries need to move beyond traditional earlier-stage research and development subsidies. And increasingly, that debate is ceding to action.
In response to the Inflation Reduction Act, Europe loosened its tight restrictions on state aid last year, allowing national governments to offer more subsidies to the clean energy industry. Nations are now offering packages on a case-by-case basis: Germany is giving the battery producer Northvolt about $980 million in state aid.
But even a package like the one Northvolt received from Germany would struggle to compete with the American tax credit, said Freyr’s chief executive, Birger Steen.
“It wouldn’t be a match, but it would be a very good start,” he said. Freyr has kept its half-built factory ready to come online — heated to 12 degrees Celsius, or about 54 degrees Fahrenheit — to ensure that it can put production in Norway should policy swing its way.
European subsidies still total only perhaps 20 to 40 percent of a firm’s investment cost, compared with more than 200 percent in the United States, said Jonas Erraia, a partner at Menon Economics who studies the battery industry. The Norwegian government specifically has pushed back on requests for more, he added.
“The Norwegian government basically said they were not in the business of subsidizing industries,” Mr. Erraia said.
There is reason for the hesitance. Countries do not want to touch off a wasteful subsidy war, one where they end up propping up companies that cannot stand on their own two feet.
“The market decides which of the projects that will make it, our ambition as a government is to mobilize as much private capital as possible,” Anne Marit Bjornflaten, the Norwegian state secretary to the minister of trade and industry, said in an email.
Freyr itself is not a sure bet. The company is still working to prove that its key energy storage technology is scalable, and its stock price slumped in 2023 amid development delays. (It ticked up slightly last week after an operations update suggesting progress.)
While it will receive U.S. production tax credits only if it successfully produces batteries, any favorable loans it wins to enable factory construction in Georgia could fail to yield much if the firm ultimately proves unsuccessful. Already, it received $17.5 million in public help to construct the Norway factory.
Collateral Damage
Freyr is not alone in shopping around for the best subsidy on offer. The Swiss manufacturer Meyer Burger Technology recently announced tentative plans to shut down a large solar module factory in Germany, though it hinted that it could change its mind if there were “sufficient measures to create a level playing field in Europe.”
In Mo i Rana, business groups remain fearful of falling behind.
Ms. Skogvold, the managing director at the chamber of commerce group, hosted an onstage interview with Jan Christian Vestre, Norway’s minister of trade and industry, at an event focused on green energy in the town on Jan. 26. It came a year and a half after Mr. Vestre visited the town to announce Norway’s battery strategy during a celebration held at Freyr’s research plant.
The tone was different this time.
Ms. Skogvold asked the minister, in Norwegian, why the government had not been more aggressive with green incentives.
“We will not reintroduce subsidies on production,” he said. But he later added that the world would have lots of demand for battery factories, and that he hoped that “if we can make it profitable in Norway, and if private capital leads the way, that we can succeed with this in Norway.”
Brent Murray contributed reporting.