Barely a day goes by without a company hinting, darkly, that it will build a factory overseas unless taxpayers offer billions of dollars of financial support to keep it close to home.

Long overdue U.S. efforts to tackle climate change and re-shore battery and semiconductor manufacturing are amplifying a corporate subsidy race on both sides of the Atlantic, with businesses unsubtly playing governments off against each to extract more cash. It makes sense, I suppose, but it’s all rather infuriating.

Rather than try to match the $369 billion U.S. Inflation Reduction Act’s clean-tech manufacturing subsidies, Europe should take a more measured approach, speed up permitting and recognize the potential upsides of U.S. largesse.

A U.S. manufacturing renaissance doesn’t automatically spell a European decline, yet the corporate welfare shakedown seems to be working. After estimating that building a U.S. battery factory could earn it around 9.5 billion euros ($10.2 billion) in government handouts, Volkswagen has reportedly put plans for as similar project in eastern Europe on hold pending details of Europe’s response to the IRA.

Meanwhile, Swedish battery maker Northvolt and truck maker Volvo have made similar veiled threats, while Jaguar Land Rover wants the U.K. to cough up £ 500 million ($602.8 million) in aid for a new battery factory or it will go to Spain instead. And not to be outdone, Intel Corp. is pressing Germany to increase the 6.8 billion euros of government aid agreed last year for a new manufacturing complex by around two-thirds, blaming higher-than-anticipated construction costs.

So it’s no surprise the European Commission last week announced a relaxation of the bloc’s state-aid rules to allow member states to match U.S. clean-tech subsidies in certain circumstances. It’s due to announce details of the Net Zero Industry Act, its response to the IRA, later this week.

Subsidies can, of course, accelerate the adoption of new technologies and compensate companies for building factories in politically desirable but higher-cost locations (building a semiconductor fab in the U.S. is up to five times more expensive than in Taiwan, according to one estimate).

But there are risks in Europe following the U.S. into a corporate welfare free-for-all. For one thing, it’s fabulously expensive. The IRA’s production tax credits are uncapped, meaning the final cost to U.S. taxpayers is likely to be many times the $31 billion Congressional Budget Office estimate. And although the climate benefits are compelling, the financial wisdom of the U.S. theoretically cutting a highly profitable company like VW a $10 billion check is questionable. (VW this week picked Canada for its first battery plant outside Europe, without detailing the subsidies it obtained. The German giant also announced 180 billion euros of spending over the next five years, so in that context it could use the help).

While companies have a duty to gobble up whatever free government money is on offer to ensure they are not competitively disadvantaged, one shouldn’t forget they also have an incentive to fan a subsidy contest. There’s a danger that companies are rewarded for decarbonization investments they needed to make anyway. And if wealthy Germany and France blithely try to match U.S. subsidies dollar for dollar, the E.U.’s single market will fracture, leaving poorer states behind.

This leaves Europe in a tight spot, and the U.K. even more so post-Brexit because it doesn’t have the E.U.’s financial muscle nor domestically owned manufacturing champions.

Companies won’t mind any of that, though. Even prior to the Biden administration’s chips and clean tech-focused legislative blitz, manufacturers were hoovering up billion-dollar sweeteners from U.S. states in return for factory commitments, in some instances amounting to hundreds of thousands of dollars for each job they promised to create.

The sums provided by the IRA’s production tax credits are an order of magnitude larger. Take battery plants, for example, where manufacturers are offered up to $45 per kilowatt hour of output, or around 30% of the current battery costs. This means a factory like the one operated by Tesla and Panasonic in Nevada should receive more than $1 billion in federal government cash every year, and a multiple of that once a recently announced expansion is completed.

Norwegian startup Freyr Battery SA told investors last month the U.S. tax credits will exceed “by a healthy margin” the $1.7 billion cost of building a plant in Georgia which it is rushing to open by 2025. Capital spending on a similar project in Norway proceeds at a more “measured pace,” the company said, pending a domestic response to the IRA. Hint!

A glut of new U.S. electric vehicle and battery plant announcements has put European officials on edge, but this is partly just timing: The U.S. production tax credits will be reduced from 2030 and expire two years thereafter, so it’s imperative companies start U.S. construction soon to bank the maximum amount possible.

It’s also important to realize that the energy transition is not a zero-sum game whereby every dollar spent by the U.S. is lost by Europe. Auto manufacturers will still need to spread their production capacity around the globe to roughly mirror where their vehicles are sold, with battery plants located nearby. If European carmakers tried to abandon their home market and export from the U.S. instead, the E.U. would surely impose higher tariffs.

And consider the potential upside for Europe: Thanks to all the free money its companies may get from the U.S., they’ll have more spare to invest at home. That’s also the case for European wind turbine champions like Vestas and Siemens Gamesa. In the long run, the U.S. splurge may also help lower the cost of clean technologies, which will benefit Europe’s green transition.

That doesn’t mean Europe should sit on its hands. Europe is leagues ahead of the U.S. in adopting carbon pricing, and there’s no shortage of European funding available. But accessing that money and getting planning permission must become less bureaucratic. Driving down energy costs is also vital in making Europe more attractive for investment. And here’s something else Europe can do: Call out companies that fan a global subsidy race.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.

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