WTO Ruling Against Biden-Era Clean Energy Policies Undermines Climate Action and the Multilateral System
WASHINGTON, D.C. — Today, a World Trade Organization (WTO) panel ruled that the Biden-era clean energy tax credits provided under the Inflation Reduction Act (IRA) are incompatible with international trade rules.
In response, Melinda St Louis, Global Trade Watch Director at Public Citizen, issued the following statement:
Today’s WTO ruling puts into sharp relief that the existing rules of the global economy are not fit for purpose to address the urgent crises facing our world — from catastrophic climate change to growing authoritarianism.
First, it highlights just how out of step WTO rules are with the imperative to enact bold industrial policies around the world needed to hasten the clean energy transition to avoid climate catastrophe. While imperfect, the IRA was the most comprehensive climate legislation ever enacted in the United States, and it was no secret that requirements to use U.S. tax dollar incentives to boost domestic manufacturing of these technologies were necessary to get the political support to pass the legislation.
The WTO’s rules were written in the 1990s, with outsized influence by large corporations in the Global North, before governments were taking climate change seriously. Since the beginning, civil society organizations and developing countries have criticized the WTO’s unfair rules that privilege corporate interests over sustainable development, human rights, and public interest goals. This ruling against the IRA sends a message to other countries around the world that the WTO’s corporate-dominated rules will prevail over attempts they may make to address climate change.
Second, ironically, today’s ruling hands a win to Donald Trump’s goal of undermining multilateral climate action globally. Trump, with congressional Republicans, are actively undermining all efforts to address catastrophic climate change in the United States and around the world — repealing historic investments in clean energy, withdrawing from all multilateral efforts to address climate change, invading countries explicitly to extract their oil, forcing countries to import more U.S. fossil fuels, and more. In the name of multilateralism, the WTO ruling against Biden-era clean energy tax credits bolsters Trump’s anti-climate crusade.
In practice, this ruling is largely symbolic. Because U.S. Presidents dating back to Barack Obama have blocked the appointment of appellate body adjudicators, the WTO dispute settlement system is defunct and unable to enforce its rulings. Additionally, the decision does not touch on the most high-profile issue in the original complaint from China, the IRA’s electric vehicle tax credits, because Trump and congressional Republicans eliminated them in the so-called “Big Beautiful Bill.”
Third, the ruling provides further evidence that if a multi-lateral rules-based order is to prevail, the rules must change. Public Citizen recently joined more than 100 organizations from around the world — including International Trade Union Confederation (ITUC), Public Services International (PSI), and Friends of the Earth International — in urging world leaders to resist both Trump’s imperialism and traditional neoliberalism as we seek to build a more just global economy.
Prominent labor, environmental, and consumer groups have urged world leaders to, at a minimum, commit not to use trade rules to challenge other countries’ climate policies. Such a Climate Peace Clause would temporarily halt cases like the one decided today so that countries can prioritize the green transition and revise the WTO rules currently creating unnecessary hurdles.
For more information:
- Labor and Environmental Groups Urge U.S. Officials to Reject WTO Attack against the IRA, Sept. 2024
- China’s Attack on U.S. Inflation Reduction Act Shows Need for Reform of WTO Rules to Remove Barriers to Climate Action, May 2024
- 190+ State Legislators From All 50 States Call for Climate Peace Clause, March 2023
- Machinists, UAW, USW, Sierra Club and Public Citizen call for IRA to be implemented as intended despite EU threats of trade challenge, Jan. 2023
- 150+ Environmental Groups Urge Inclusion of ‘Climate Peace Clause’ in Trade Agreements, May 2022
- WTO General Exceptions: Trade Law’s Faulty Ivory Tower