Green Subsidies And The Wto

This paper provides a detailed explanation how the law of the World Trade Organization regulates environmental subsidies with a focus on renewable energy subsidies. The paper begins by discussing the economic justifications for such subsidies and the criticisms of them and then gives examples of different categories of subsidies. Next the paper provides an overview of the relevant WTO rules and caselaw, including the recent Canada -Renewable Energy case. The paper also makes specific recommendations for how WTO law can be improved, and discusses the existing literature discussing reform proposals. The study further finds that because of a lack of clarity in WTO rules, for some clean energy subsidies, a government will not know in advance whether the subsidy is WTO-legal.

Do the World Trade Organization's rules on 'green box' farm subsidies allow both rich and poor countries to achieve important goals such as food security, or do they worsen poverty, distort trade and harm the environment? Current WTO requirements set no ceiling on the amount of green box subsidies that governments can provide, on the basis that these payments cause only minimal trade distortion. Governments are thus increasingly shifting their subsidy spending into this category, as they come under pressure to reduce subsidies that are more directly linked to production. However, growing evidence nonetheless suggests that green box payments can affect production and trade, harm farmers in developing countries and cause environmental damage. By bringing together new research and critical thinking, this book examines the relationship between green box subsidies and the achievement of sustainable development goals, and explores options for future reform.

Subsidies are arguably the dominant theme in International Economic Law. A prolific case law has been elaborated by WTO Panels and Appellate Body in response to the multitude of complaints lodged in the past two decades (Softwood Lumber, Airbus, Boeing, etc.) Unfortunately, it is possible to be overwhelmed by the complexity of this case law. This book provides a comprehensive approach in response to this complexity. First, it avoids unnecessary legal jargon, making it accessible to a large public. Second, it adopts a comprehensive and progressive approach where legal subtleties are not avoided but presented at the right moment and the right place. The reader is therefore not overwhelmed from the outset by a multitude of details. The first Part of the book adopts the perspective of a WTO Member seeking to counter an alleged subsidy granted by another Member. To this end, this first Part scans and analyzes in detail all WTO Agreements, containing cumulative disciplines and remedies relating to subsidies. Therefore, it is not only the SCM Agreement that is scanned and analyzed but also the Agreement on Agriculture (AoA), GATT 1994, and even the 1980 Agreement on Trade in Civil Aircraft (ATCA). The second Part of the book adopts the perspective of a WTO Member accused of granting subsidies violating subsidies disciplines.To this end, an original classification is offered of the various strategies that can be used by this Member. For this purpose, a distinction is made between the “threshold strategy” where the existence of a challengeable subsidy is recused from the outset, the “denying violation of disciplines strategy,”the “exemption or exception strategy,” the “procedural and evidentiary strategy,” and finally the “implementing strategy.” The last Part of this book, which could turn out to be the most useful for the community of agents concerned by subsidies, offers an original examination of pending legal issues. To this end, a relevant distinction is established between pending legal issues partially answered by present case law and pending legal issues not still answered by present case law. This case law and the norms disciplining subsidies in WTO Agreements are of utmost importance first for International Trade Ministries, Parliaments, and International Institutions (OECD, CNUCED, FAO, etc.). However, Non-Governmental Organizations (World Wide Fund, etc.) are also directly concerned by this topic regarding, for example, fisheries subsidies and their impact on overexploitation of marine resources. The private sector (fishing fleets, fishermen, extractive industries, etc.) is also affected by this topic particularly regarding future investments.Law firms involved in subsidies cases are naturally at the forefront of the community of agents concerned by this topic.

Today, abnormal weather events of unprecedented magnitude and geophysical phenomena induced by climate change imperil humankind and living species' life and health. For a successful transition to a resilient, carbon-neutral economy, countries need urgently to adopt a portfolio of ambitious climate change mitigation measures. Subsidies facilitating the creation, development, and diffusion of breakthrough and disruptive clean energy technologies lie at the heart of governments' climate change policy packages. Since 2010, however, trade disputes over green subsidies have mushroomed. These frictions have thrown into the limelight the lack of an exception or exemption clause under the World Trade Organization (WTO) Agreement disciplining subsidies and countervailing measures (the SCM Agreement). Against this backdrop, the thesis inquires whether, in the absence of any 'saving clause', the SCM Agreement constrains governments' ability to devise climate change mitigation subsidies aimed to facilitate the shift towards a decarbonised economy. It makes four central contributions. First, it shows that the criteria shaping the WTO subsidy discipline cannot on their own provide governments with a predictable and definite policy space to adopt clean energy subsidies. Second, thoroughly examining the WTO adjudicators' attempts to inject flexibility into the subsidy definition, the thesis demonstrates that an adjudicatory solution to accommodate climate change mitigation subsidies may undermine the WTO subsidy discipline's effectiveness and, more broadly, the legitimacy of the WTO adjudicatory body. Third, the thesis reveals that the WTO membership could draw very little inspiration from the EU State aid discipline to craft exemptions or exceptions for green subsidies owing to the fundamental differences between the two regimes. Fourth, against the background of the current gridlocked multilateral trade negotiations, the thesis puts forward pragmatic policy proposals to 'green' the WTO subsidy rulebook. It argues that WTO Members should embrace alternative modes of governance and negotiations within the WTO, such as enhanced transparency mechanisms and plurilateral negotiation approaches.

Growing evidence suggests that 'green box' farm subsidies may in fact affect production and trade, harm farmers in developing countries and cause environmental damage. This book brings together new research and analysis examining the relationship between green box subsidies and sustainable development goals, and explores options for future reform.

Faced with the energy transition imperative, governments have to decide about public policy to promote renewable electrical energy production and to protect domestic power generation equipment industries. For example, the Canada - Renewable energy dispute is over Feed-in tariff (FIT) programs in Ontario that have a local content requirement (LCR). The EU and Japan claimed that FIT programs constitute subsidies that go against the SCM Agreement, and that the LCR is incompatible with the non-discrimination principle of the World Trade Organization (WTO). This paper investigates this issue using an international quality differentiated duopoly model in which power generation equipment producers compete on price. FIT programs including those with a LCR are compared for their impacts on trade, profits, amount of renewable electricity produced, and welfare. When 'quantities' are taken into account, the results confirm discrimination. However, introducing a difference in the quality of the power generation equipment produced on both sides of the border provides more mitigated results. Finally, the results enable discussion of the question of whether environmental protection can be put forward as a reason for subsidizing renewable energy producers in light of the SCM Agreement.

Available online: https://pub.norden.org/temanord2020-539/ Estimated at USD 478 billion in 2019, fossil fuel subsidies strain the public purse, contribute to climate change, slow the uptake of renewable energy, and lead to local air pollution and associated impacts on public health. Their reform could thus lead to a wide range of socioeconomic and environmental benefits. Despite its binding rules to regulate subsidies, the World Trade Organization (WTO) has so far failed to play any significant role in constraining government support to fossil fuels. Against this backdrop, this report explores whether WTO rules and practices are fit for purpose in addressing fossil fuels subsidies and supporting the clean energy transition, and how they could be reformed to more effectively contribute to these key objectives. It also offers practical recommendations for WTO members and other stakeholders interested in moving this agenda forward.

Canada-Renewable Energy presented the WTO Panel and Appellate Body (AB) with a novel issue: at the heart of the dispute was a measure adopted by the province of Ontario whereby producers of renewable energy would be paid a premium relative to conventional power producers. Some WTO Members complained that the measure was a prohibited subsidy because payments were conditional upon using Canadian equipment for the production of renewable energy. The AB gave them right only in part: it found that a local content requirement had indeed been imposed, but also found that it lacked evidence to determine whether a subsidy had been bestowed. The report is, for the reasons explained below, incoherent and could hardly serve as precedent for resolution of similar conflicts in the future. The facts of the case though, do raise legitimate questions both with respect to the specifics of the case, as well as of more general nature regarding the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the role of the judge when facing legislative failure. In this paper, we provide some responses to these questions in light of the theory and evidence regarding industrial policy in the name of environmental protection.

Canada-Renewable Energy presented the WTO Panel and Appellate Body (AB) with a novel issue: at the heart of the dispute was a measure adopted by the province of Ontario whereby producers of renewable energy would be paid a premium relative to conventional power producers. Some WTO Members complained that the measure was a prohibited subsidy because payments were conditional upon using Canadian equipment for the production of renewable energy. The AB gave them right only in part: it found that a local content requirement had indeed been imposed, but also found that it lacked evidence to determine whether a subsidy had been bestowed. The report is, for the reasons explained below, incoherent and could hardly serve as precedent for resolution of similar conflicts in the future. The facts of the case though, do raise legitimate questions both with respect to the specifics of the case, as well as of more general nature regarding the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the role of the judge when facing legislative failure. In this paper, we provide some responses to these questions in light of the theory and evidence regarding industrial policy in the name of environmental protection.