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There’s a big new headache for the Green New Deal

The WTO wants to rule out the local economic benefits that the initiative would rely on.

- June 28, 2019

The World Trade Organization is back in the news, with a Thursday ruling against seven states’ renewable energy policies. The WTO is already unpopular with right-wing nationalists like President Trump. By siding with India against the United States, the WTO is likely to make left-leaning politicians and the burgeoning global environmental movement unhappy.

States are acting on climate because the federal government won’t

The WTO is acting against state-level policies intended to improve the environment, stepping into the void left by the federal government. In 2009, the U.S. Senate refused to vote on what was at that time the most ambitious climate change legislation: the Waxman-Markey Act. Concluding that federal action might never be forthcoming, states (especially those that lean Democratic) began enacting climate policy of their own.

The measures include biodiesel incentives in Montana, nudges for Michigan-made clean-energy manufacturing and other plans in California, Delaware, Connecticut, Minnesota and Washington state. The common denominator of these policies is an attempt to soften the inevitable economic dislocations of moving away from the carbon economy. The Michigan policy was typical: Electricity providers get a renewable credit when they generate one megawatt of green energy. However, they get another tenth of a credit when that energy uses Michigan-made equipment or Michigan laborers.

These policies provide local subsidies for a reason. As research by David J. Hess, Quan D. Mai, Rachel Skaggs and Magdalenea Sudibjo finds, policies that aim, for example, to create local jobs have broad public appeal and can even help build bipartisan coalitions. As climate expert and political scientist Leah Stokes has written, emphasizing local effects that people can see with their own eyes helps to overcome the resistance to taking a big leap forward that would otherwise feel daunting.

The WTO sees “Buy Local” politics as protectionist

When India complained about these green initiatives, it did not have to show that Indian companies tried to qualify for any of them, or that they had been denied access, or that they lost any money to make a case at the WTO. Under the rules of the General Agreement on Tariff and Trade (GATT), Michigan’s energy credit was invalid, because Indian solar panel exporters in theory would not have qualified for that extra tenth of a renewable energy credit if they had tried to sell them in Michigan.

This was not a surprising ruling. Indeed, the Obama administration targeted similar measures in India in 2013, winning its case just months before Trump took office. Washington state has been through a battery of WTO challenges over its various industrial policies for aerospace giant Boeing.

It might seem to some that measures to protect the environment should prevail over trade interests. However, under the postwar global order, open commercial flows are prioritized above other values. As scholars such as Quinn Slobodian, Samuel Moyn and Katharina Pistor have argued in recent books, the order could have made equity or solidarity the preeminent value. Instead, it prioritized trade and money — and prioritized them even more after national social protections were rolled back in the 1990s. In this case, the Trump administration stacked the deck against the state-level policies by declining to invoke the GATT’s Article XX, a general exception clause that allows environmental considerations to be balanced against commercial ones. (India did not prevail on these grounds in its earlier case.)

This is a problem for the Green New Deal

The WTO decision collides with a groundswell of progressive interest in a Green New Deal — a plan that looks a lot like the state policies that the commercial body just ruled against. The Green New Deal resolution by Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Edward J. Markey (D-Mass.) outlines five goals, 14 projects and 15 requirements to help evaluate those projects. Instead of going ahead with carbon taxes, which would likely be unpopular, it gives groups that might be expected to oppose a carbon tax — front-line communities, manufacturing workers — a stake in the deal’s success. It uses Buy Local or Hire Local requirements to make its proposed climate solutions politically sellable and viable. These are the sorts of provisions that India and other countries can be expected to challenge if and when a Green New Deal gets through Congress.

[ Read Leah Stokes on the Green New Deal and Congress]

This may, in turn, lead environmental activists to start focusing on changes to global governance. They may have an opportunity, given that the Trump administration is on the verge of bringing the WTO’s adjudicative machinery to a halt. It’s possible, for example, that it might push to suspend WTO rules, fill vacancies in the WTO’s appeals body with environmental lawyers, and set tariffs at zero for countries that adopt their own version of a Green New Deal, while levying trade penalties against those that do not. As environmentalists gear up their policy ambitions, there will be increased clashes with the existing international trade regime, and calls for change from the left as well as the right.

[Read Manfred Elsig, Mark Pollack and Gregory Shaffer on the crisis at the WTO]

Todd N. Tucker is a political scientist and fellow at the Roosevelt Institute, and the author of “Judge Knot: Politics and Development in International Investment Law” (Anthem Press). Follow him on Twitter @toddntucker.