The Ministry of New and Renewable Energy (MNRE) is studying the Inflation Reduction Act (IRA) of the US and may approach the World Trade Organisation (WTO) if it is found that the green energy subsidy scheme violates norms.

“It’s called inflation reduction, but it is a violation of WTO rules. It is offering so much subsidy which is a trade barrier. I have asked the MNRE to examine it and we want to approach the WTO on this issue (based on the study),” Power and New & Renewable Energy Minister RK Singh told businessline when asked about the government’s stand on the IRA.

On the recently ratified European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM), Singh said developed countries have a greater responsibility towards clean energy transition.

“Global warming is largely due to developed nations. So, they have a responsibility to reduce and they should meet the cost for reduction in emissions. They must help developing countries. But, they are doing the opposite. Through this carbon tax they are placing the burden of their transition on developing nations. This is not acceptable,” he pointed out.

These green energy subsidies can make India’s export of certain products and services incompetitive.

Green energy subsidies

The IRA, signed into law in August 2022, aims to spend around $370 billion to lower energy costs for families and businesses, accelerate private investment in clean energy solutions, strengthen supply chains from critical minerals to efficient electric appliances among others.

Even the EU has raised concerns over the Act and is holding bilateral discussions with the US. The 27-country bloc fears that the Act, with its generous tax breaks, can lure away investments from the EU to the US and will put its companies at a disadvantage.

However, the recent bp Outlook 2023 report said: “The possible impacts on other countries and regions are not considered, although in practice the IRA has the potential to have positive spillover effects by helping to reduce global technology costs, expand internationally tradeable supplies of some forms of low-carbon energy, and increase the pressure on other countries and regions to offer similar types of incentives.”

Similarly, EU’s CABM puts a “fair price” on carbon emitted during the production of carbon intensive goods that are entering the EU and seeks to encourage cleaner industrial production in non-EU countries. It takes effect in 2026, but reporting on product level carbon emissions starts from October 2023.