On September 23, 2024, the World Trade Organization’s Dispute Settlement Body (DSB) announced that it has agreed to establish a panel to examine certain tax credits provided by the U.S. government under the Inflation Reduction Act (IRA) to determine their compliance with WTO regulations.
Previously, China had requested the formation of an expert group, but did not receive U.S. consent during the DSB meeting in July 2024. This marks China’s second request to the DSB on this issue. China specifically targets the clean vehicle tax credits and renewable energy tax credits under the IRA, which include credits for energy property investments, clean power investments, renewable electricity production, and clean electricity production.
The U.S. argues that the IRA is a crucial step toward clean energy, aimed at ensuring a secure and sustainable global supply chain for clean energy. It views the IRA tax credits as essential measures to combat climate change.
However, China contends that the subsidies under the IRA favor U.S. products over imports, discriminating against Chinese goods and violating WTO rules prohibiting such discrimination. China asserts that while countries pursue economic benefits through a clean energy transition, “increasing protectionism is not a solution to the climate crisis.”
Seventeen countries and the European Union (EU) have reserved their rights to participate as third parties in the panel proceedings. The next DSB meeting is scheduled for October 28, 2024.
