WTO deems US green subsidies illegal after China's complaint. FEB 2, 2026

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WTO deems US green subsidies illegal after China's complaint

The World Trade Organization (WTO) has ruled that the United States violated international trade rules by granting billions of dollars in tax incentives to clean energy companies, following a complaint filed by China. The decision reignites the global debate on how to finance the energy transition without distorting international competition.

The WTO panel concluded that certain tax credits provided for in the Inflation Reduction Act (IRA) — the main climate package approved during Joe Biden's administration — are incompatible with core agreements of the organization, including the General Agreement on Tariffs and Trade (GATT) and rules on subsidies and investment measures.

According to the arbitrators, the so-called domestic bonuses associated with investment and production credits for renewable energy favor manufacturers located in the United States, which constitutes trade discrimination. The WTO recommended that the United States eliminate these incentives by October 1, 2026.

Energy transition under dispute

China, which initiated the process in March 2024, celebrated the decision, calling it "objective and impartial." Beijing argues that American subsidies distort global supply chains, especially in the renewable energy and electric vehicle sectors.

Washington, in turn, reacted harshly. The US trade representative stated that current WTO rules are insufficient to deal with what he called "excess industrial capacity" in strategic sectors, in direct reference to Chinese industrial policy for green technologies.

The impasse exposes a central contradiction in the global climate agenda: how to accelerate investments in decarbonization without provoking trade wars. Developed and emerging countries are increasingly resorting to subsidies to protect their green industries, while the multilateral trading system remains based on norms conceived before the climate crisis gained centrality.

Electric Vehicles Excluded from Decision

The panel did not analyze subsidies for electric vehicles, as these incentives were terminated in 2025 following legislative changes promoted by the current US government. Even so, the case creates a relevant precedent for future industrial policies focused on the energy transition.

Uncertain Appeal

The United States and China have up to 60 days to appeal the decision. However, the WTO Appellate Body has been paralyzed since 2019, following blockages imposed by Washington on the appointment of new judges. In practice, any appeal is likely to go unadjudicated.

Meanwhile, international pressure is growing to update global trade rules in the face of the climate emergency—a challenge that pits sustainability, industrial sovereignty, and economic justice against each other.

The Green Amazon News – International

This text was compiled using public data, scientific reports, and information from meteorological institutions.

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