[BUG] VS Code sidebar extension ignores CLAUDE_CODE_DISABLE_1M_CONTEXT on Pro plan (Windows)

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

The VS Code sidebar extension ignores CLAUDE_CODE_DISABLE_1M_CONTEXT=1 and always attempts to use 1M context, resulting in the following error on Pro plan:

API Error: Usage credits required for 1M context · turn on usage credits at claude.ai/settings/usage, or use --model to switch to standard context

This happens even though actual usage is well within plan limits (Session: 23%, Weekly: 4%).

What Should Happen?

The sidebar extension should respect CLAUDE_CODE_DISABLE_1M_CONTEXT=1 and use standard context, exactly like the terminal (claude command) does.

Steps to Reproduce

1. Set CLAUDE_CODE_DISABLE_1M_CONTEXT=1 via any method (see below)
2. Open VS Code
3. Launch Claude Code from the sidebar extension
4. Send any message
5. Error appears immediately

What I Tried (all failed for the sidebar extension)

1. terminal.integrated.env.windows in VS Code settings.json:

{
  "terminal.integrated.env.windows": {
    "CLAUDE_CODE_DISABLE_1M_CONTEXT": "1"
  }
}

1. env key in ~/.claude/settings.json:

{
  "env": {
    "CLAUDE_CODE_DISABLE_1M_CONTEXT": "1"
  }
}

1. Windows user-level environment variable (no admin rights required):

[System.Environment]::SetEnvironmentVariable("CLAUDE_CODE_DISABLE_1M_CONTEXT", "1", "User")

Confirmed with [System.Environment]::GetEnvironmentVariable("CLAUDE_CODE_DISABLE_1M_CONTEXT", "User") returning 1.

1. PowerShell profile ($PROFILE):

$env:CLAUDE_CODE_DISABLE_1M_CONTEXT = '1'

Confirmed with echo $env:CLAUDE_CODE_DISABLE_1M_CONTEXT returning 1 in the integrated terminal.

All four methods correctly set the variable, but the sidebar extension still triggers the 1M context error.

Workaround

Launching claude from the integrated terminal works correctly — the variable is respected in that context. However, the terminal interface is significantly less user-friendly than the sidebar extension.

Environment

• Claude Code version: 2.1.128
• Platform: Windows
• Launch method: VS Code sidebar extension
• Plan: Claude Pro
• VS Code terminal: PowerShell

Related Issues

#62063, #62199, #63700

What Should Happen?

The VS Code sidebar extension should respect CLAUDE_CODE_DISABLE_1M_CONTEXT=1 and use standard context, just like launching claude from the integrated terminal does.

Error Messages/Logs

Steps to Reproduce

Mets :

Set CLAUDE_CODE_DISABLE_1M_CONTEXT=1 via any of the following methods (all tested, all confirmed active via echo $env:CLAUDE_CODE_DISABLE_1M_CONTEXT returning 1):
terminal.integrated.env.windows in VS Code settings.json
env key in ~/.claude/settings.json
[System.Environment]::SetEnvironmentVariable("CLAUDE_CODE_DISABLE_1M_CONTEXT", "1", "User") in PowerShell
PowerShell $PROFILE with $env:CLAUDE_CODE_DISABLE_1M_CONTEXT = '1'
Restart VS Code completely
Open Claude Code from the sidebar extension (not the terminal)
Send any message
Error appears immediately: API Error: Usage credits required for 1M context

Note: launching claude from the integrated terminal works correctly with the same variable set.

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.128

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

PowerShell

Additional Information

_No response_