The US Inflation Reduction Act (IRA) will drive investment into cleaner energy and represents the most important climate deal since the landmark 2015 Paris Agreement, according to International Energy Agency (IEA) head Fatih Birol (pic).

Birol told a panel on energy security at the World Economic Forum (WEF) annual meeting in Davos that energy security was now the biggest driver of climate investment, as countries seek to ensure supplies.

The IRA provide huge incentives for private investment into clean energy, with the majority of the $394 billion in energy and climate funding in the form of tax credits. Corporations are the biggest recipient, with an estimated $216 billion worth of tax credits. These are designed to catalyse private investment in clean energy, transport, and manufacturing. Many of the tax incentives in the bill are direct pay, meaning that an entity can claim the full amount even if its tax liability is less than the credit.

While European countries have welcomed the new commitment to energy transition by US President Joe Biden’s administration, some have said they fear it may disadvantage their companies.

“I understand the importance of the Act from a US perspective but on the other side I should also think about European interests,” Jozef Sikela, the Czech minister of industry and trade, said on the same WEF panel as Birol.

Sikela said European households and industries were paying the biggest bill for the global energy crisis, while the new U.S. legislation would pull away investors and force governments to compete on the level of subsidies.

“When we start a rally of subsidies, this is dangerous,” he said, adding that Europe should be lobbying for exemptions from the $430 billion bill, which Biden signed into law last year.

Vicki Hollub, CEO of US oil producer Occidental Petroleum Corp, called the U.S. legislation one of the most transformative bills ever signed.

But she rounded on European governments for taxing fossil fuel firms, that were also developing renewable energy.

“With all due respect to Europe I hate to say it but I have to say it, imposing windfall profit tax on the oil companies that are doing their best to grow wind and solar in Europe was not the smartest move in my opinion,” Hollub said.

Subsidies are very important for the development of new technologies, she told the same panel.