IRA vs EU Regulations: What global companies need to know

As the global push for decarbonisation gains momentum, businesses face a rapidly evolving regulatory environment. In the United States, the Inflation Reduction Act (IRA) is offering incentives to accelerate clean energy and battery sustainability. Across the Atlantic, the European Union is enforcing stringent regulatory frameworks, most notably the EU Green Deal Industrial Plan (GDIP) and the EU Battery Regulation, which impose strict market access conditions.

While both regions aim to build more transparent, ethical, and sustainable supply chains, they take fundamentally different approaches. The IRA operates through financial incentives and localisation targets. EU regulations focus on legal enforcement, supply chain traceability, and due diligence.²

This article compares the core frameworks, IRA, GDIP, and the EU Battery Regulation, and analyses how global companies can harmonise their traceability strategy to ensure compliance in both markets. We also explore how one system can support both GDIP compliance and battery traceability, reducing operational complexity and risk.

Different philosophies with a common goal

Although they share a goal of building greener, more transparent supply chains, the EU and the US take very different paths.

Put simply, the IRA rewards those who meet its sourcing requirements, while the EU penalises those who don’t meet its compliance standards. Where the IRA uses carrots (incentives to attract green investments), the EU uses sticks (legal enforcement, due diligence reporting, and market access bans for non-compliant products).

Understanding these distinctions is critical to aligning your compliance strategy.

What the IRA means for supply chain traceability

The IRA, passed in 2022, has rapidly become the centrepiece of US climate industrial policy. It offers more than $370 billion in clean energy incentives, but these incentives come with stringent conditions, especially in battery and EV supply chains¹.

Key requirements of the IRA

• To qualify for EV tax credits (up to $7,500), vehicles must be assembled in North America and contain a high proportion of battery materials sourced from the United States or its allies.⁴
• From 2025, critical minerals used in batteries must not come from a “foreign entity of concern” (e.g., China, Russia, North Korea, Iran)⁴.
• The sourcing and processing of materials must be verifiable and traceable, with auditable documentation⁴.

This has placed enormous pressure on battery manufacturers, original equipment manufacturers (OEMs), and mineral suppliers to establish secure, transparent sourcing structures. With billions in subsidies on the line, businesses are fast realising that battery traceability is now a core business requirement.

The IRA is the centrepiece of the US green industrial strategy. It offers billions in tax credits for electric vehicles, battery manufacturing, and clean energy technologies.

How the EU Green Deal Industrial Plan (GDIP) is driving a cleantech manufacturing boom

While the US IRA relies heavily on financial incentives, the EU’s GDIP combines funding support with regulatory reform to boost Europe’s competitiveness in net-zero industries⁵. Announced in 2023 as a response to the IRA and global cleantech race, the GDIP is the EU’s roadmap for scaling up domestic green manufacturing and securing industrial leadership in a decarbonising world.

Core pillars of the GDIP

• Simplified permitting and regulation for strategic net-zero technologies
• More flexible state aid rules, allowing Member States to match non-EU subsidies
• Access to funding instruments, including the Innovation Fund and InvestEU
• A future European Sovereignty Fund to scale investment across Member States⁶

The GDIP targets industries that are critical to the energy transition, such as:

• Solar and wind energy
• Batteries and storage
• Heat pumps
• Hydrogen production
• Carbon capture, utilisation and storage (CCUS)
• Critical raw materials⁶

Unlike single-issue regulations, the GDIP is a holistic industrial strategy designed to create long-term competitive advantages. It aligns industrial policy with climate goals, reducing dependency on foreign supply chains and unlocking faster cleantech deployment.

For businesses in the energy, manufacturing, and materials sectors, this creates a window of opportunity – access to faster permitting, enhanced funding, and a central role in Europe's transition economy. Now is the time to evaluate whether your innovation pipeline aligns with GDIP priorities, and if so, how to position yourself to benefit from this accelerated push toward industrial decarbonisation.

What about the EU battery regulation?

The EU Battery Regulation further raises the bar, particularly for companies manufacturing or importing EV, industrial, and LMT batteries into the EU. Here’s what businesses need to know in brief:

• You must provide a digital battery passport for in-scope batteries
• Batteries must meet new carbon footprint thresholds
• Recycled content and battery recycling processes must be documented and reported
• You need full battery traceability across the lifecycle: from mining and processing to recycling⁷

The regulation is being phased in gradually from 2024 through 2027. However, businesses must begin preparing now to align their battery sustainability strategy and documentation practices. Read more about battery supply chain traceability.

Understanding the differences and overlaps for requirements between IRA, GDIP, and the EU Battery Regulation

Regulatory fragmentation is real, but so is the opportunity for strategic alignment through smart traceability.

These regulations approach sustainability from different angles. While the IRA emphasises domestic economic growth and geopolitical security by tying clean energy incentives to localisation and sourcing requirements, the GDIP takes a more integrated approach, combining policy reform with funding to drive a competitive European cleantech economy. Meanwhile, the EU Battery Regulation dives into the technical specifics of lifecycle accountability, creating granular compliance requirements for batteries at every stage.

These differences can make compliance feel overwhelming for global companies. But if you step back, a pattern emerges: regulators on both sides of the Atlantic are converging on a shared need for transparent and verifiable data across supply chains. The mechanism of enforcement may differ, but the foundational requirement is the same: proof of sustainability, traceability, and responsible sourcing.

For businesses operating across multiple jurisdictions, this presents an opportunity. Rather than developing siloed compliance programs for each regulation, companies can build a core traceability infrastructure — a digital backbone that collects and verifies supply chain data once, then adapts that data to meet the specific requirements of each framework.

This is where smart traceability becomes a strategic asset. It reduces duplication, cuts audit prep time, and makes it easier to scale compliance efforts globally. In short, the landscape may be fragmented, but your approach doesn’t have to be.

Can one traceability system support both US and EU regulatory compliance?

A modular traceability infrastructure with the right design allows companies to gather and share compliance data that can be flexibly applied across different regulatory demands.

1. Unified traceability architecture: Track materials, suppliers, and production inputs from origin to final product using a secure system that ensures data integrity and auditability.
2. Regulation-specific modules: Apply the same foundational data to support:
   
   1. IRA origin validation (country of origin, ownership, manufacturing location)
   2. GDIP funding eligibility (project-level emissions data, cleantech classification, supply chain localisation)
   3. Battery passport integration (CO₂ footprint, recycled content, material provenance)
3. Privacy-preserving data sharing: Enable supply chain actors to verify compliance without revealing commercially sensitive information, which is essential for building trust and maintaining collaboration across competitive value chains.
4. Audit-ready documentation: Generate pre-formatted reports tailored to each regulatory body, from tax credit submissions to EU funding applications, reducing friction and compliance risk.

Conclusion: From compliance cost to competitive edge

These regulations are not going away; they’re only just the beginning. More regions are considering similar frameworks, from Canada to Australia. However, rather than treating compliance as a burden, forward-thinking companies are turning it into an opportunity and securing market access.

For international companies operating in both the US and the EU, these regulations are a strategic business challenge that can help them win trust and market share. Companies should act early to invest in a digital traceability system that can meet the needs of multiple frameworks, whether you’re providing green technology manufacturing or tracking battery sustainability across continents. 

At Circularise, we’ve designed our traceability platform with this global future in mind. We help you map your suppliers, identify and document data requirements for supply chain traceability, aligning and streamlining compliance, and unlocking opportunities.