Seeds of Another Trade War Over Clean Energy

The legislative text for the president’s Build Back Better Act has several provisions to incentivize domestic job creation and reshoring. This is no surprise given that President Biden has, from the start, framed climate action in terms of delivering quality jobs for Americans. But the provisions, as written, treat domestic manufacturers differently than foreign ones: they offer higher credits for renewable energy projects with domestically sourced inputs and for electric vehicles manufactured in the United States. In the past, such measures have been found to violate the rules of the World Trade Organization (WTO), which aims for consistent treatment between domestic and foreign suppliers. It is easy to see the seeds of another trade war over low-carbon energy being sewn in Congress today.