China Challenges US at WTO Over Clean Energy, EV Subsidies
TL/DR –
China has formally petitioned the World Trade Organization (WTO) for dispute consultations with the U.S. regarding its Inflation Reduction Act. China argues that the U.S.’s tax credits, which promote the electric vehicle and renewable energy sectors, discriminate against imported goods and goods of Chinese origin, violating several trade agreements. China views the Clean Vehicle Credit, Investment Tax Credit for Energy Property, Clean Electricity Investment Tax Credit, Production Tax Credit for Electricity from Renewables, and Clean Electricity Production Tax Credit as discriminatory products, and finds the subsidies under the Inflation Reduction Act protectionist and against WTO rules.
China Challenges US Clean Energy Tax Credits at WTO
China has officially lodged a dispute with the World Trade Organization (WTO) over U.S. tax credits intended to boost electric vehicle (EV) production and renewable energy projects under the Inflation Reduction Act (IRA). The request for consultations was dispersed to WTO members last week, citing potential U.S. favoritism of domestic goods over imported goods, particularly those of Chinese origin.
China argues this breaches the General Agreement on Tariffs and Trade 1994, the Agreement on Trade-Related Investment Measures, and the Agreement on Subsidies and Countervailing Measures. The IRA, established in August 2022, allocates $369.75 billion over a decade to energy security and climate change initiatives in the U.S.
China’s independent studies estimate that the IRA’s value for clean energy and e-mobility programs surpasses $1 trillion. They assert that only certain subsidies contingent on the use of domestic over imported goods, or those discriminating against Chinese goods, are in dispute.
China claims the Clean Vehicle Credit, Investment Tax Credit for Energy Property, Clean Electricity Investment Tax Credit, Production Tax Credit for Electricity from Renewables, and Clean Electricity Production Tax Credit as discriminatory. They maintain that non-discriminatory subsidies should be used to facilitate the transition to clean energy under WTO rules.
However, they consider the IRA’s subsidies as “discriminatory, protectionist, and contrary to WTO rules,” adding, “They do nothing to advance the shared interest that all members have in addressing climate change.”
In December, the U.S. Department of Treasury and Internal Revenue Serviceoffered guidance on the IRA’s advanced manufacturing production credit. Section 45X provided a credit for domestic production of solar and wind energy components, inverters, qualifying battery components, and applicable critical minerals.
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