WTO To Review Tax Credits Under US Inflation Reduction Act

The World Trade Organization (WTO) has agreed to establish a panel to review certain tax credits the US government is providing under its Inflation Reduction Act (IRA) to see if these comply with its rules. The WTO’s Dispute Settlement Body (DSB) announced the decision at its meeting on September 23, 2024.  

China specifically targets the Clean Vehicle Credit, and the Renewable Energy Tax Credits (including the Investment Tax Credit for Energy Property, the Clean Electricity Investment Tax Credit, the Production Tax Credit for Electricity from Renewables, and the Clean Electricity Production Tax Credit), under the IRA.  

The DSB move follows the 2nd such request from China after the country’s previous request to establish such a panel was not agreed to by the US in the July 2024 meeting.  

The US contends that the IRA is its most significant step towards clean energy through which it aims to ensure secure and sustainable supply chains for a global clean energy future. It justifies the IRA tax credits as necessary to combat climate change.  

However, China believes that the subsidies under the program favor US goods over imports and discriminate against goods of Chinese origin, thus violating WTO rules prohibiting such discrimination. It believes that while countries will target economic benefits by pursuing a clean energy transition including producing clean energy products and technology, ‘increased protectionism is not a solution to this climate crisis.’ 

In the July 2024 meeting, the US objected to the Chinese request for the formation of a WTO panel saying it undermines the country’s efforts to address the global climate crisis and build a more resilient clean energy supply chain.  

“China's complaint is a regrettable attempt to prevent progress on these critical issues, to entrench reliance on China's non-market excess capacity, and to undermine the broader interests of all WTO members,” stated the US.   

It added, “It is hypocritical for China to target the US measures in this dispute while failing to address its industrial targeting of clean energy sectors and its use of non-market policies and practices that are detrimental to all members.”  

A total of 17 countries and the European Union (EU) have reserved their 3rd party rights to participate in the panel proceedings. The next DSB meeting is now scheduled for October 28, 2024.