Domestic Content Requirements and Global Collective Action

Daniel J. Hemel and Yair J. Listokin

National Tax Journal, 2026, vol. 79, issue 3, 659 - 675

Abstract: Domestic content requirements (DCRs) are a common but controversial feature of clean energy tax credits and subsidies. These requirements distort production and consumption decisions, increasing the social cost of achieving climate goals. However, DCRs can also yield an underappreciated benefit: one country’s implementation of a subsidy with a DCR may induce other countries to adopt similar subsidies, thus accelerating the global transition away from fossil fuels. This paper develops a game-theoretic model of clean energy policy choices, identifies conditions under which DCRs increase global welfare, and derives policy-relevant lessons for tax and trade law.

Date: 2026
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