World Trade Organization Renewable Energy Subsidies And The Case Of Feed In Tariffs

Renewable energy subsidies are crucial for combatting climate change, and yet the world's international legal infrastructure is not designed to accommodate such subsidies. The world needs a renewable energy sector to develop and implement the technologies necessary to reduce carbon and renewable subsidies are one of the best ways to cultivate this sector quickly. At the same time, one country's unfair subsidies can harm another country's industry. To take a recent newsworthy example, China's subsidies for its solar exports has allegedly bankrupted solar companies in the United States (US) and European Union (EU), undermining this crucial sector in these countries as it takes root. Thus, renewable subsidies pit two legitimate policy concerns against each other: cultivation of renewable energy and prevention of unfair trade practices. The World Trade Organization (WTO) regulates most subsidies effectively, but was simply not designed with renewable subsidies in mind. The Agreement on Subsidies and Countervailing Measures (SCM) - the heart of the WTO subsidies regime - treats renewable subsidies the same as all other subsidies, without an environmental exception in force that takes into account non-trade concerns. This environmental blind spot is unusual for the WTO: for example, Article XX of the General Agreement on Tariffs and Trade (GATT) includes an environmental exception for tariffs and other non-subsidy measures. However, an environmental exception did not make it into the SCM, leaving the agreement ill-suited to balance trade and environmental concerns. This article proposes several legal solutions to fix the SCM's environmental blind spot - invocation of the Agreement on Agriculture (AoA) for some subsidies, using the SCM's definition of subsidies to exclude some forms of support for renewable energy -- especially Feed-in Tariffs (FITs) - from the WTO's subsidies regime entirely, adopting a flexible interpretation of GATT Article XX's environmental exception such that it may apply to subsidies, and negotiating a new WTO agreement for renewable subsidies. Of all the solutions proposed, this article argues that the best approach would be to apply GATT Article XX to the SCM. This approach is not obvious, because WTO law does not make clear the relationship between the GATT and the SCM. Nevertheless, strong legal and policy reasons support this approach. This article proceeds as follows: Part II provides background, first on renewable subsidies, then on the current WTO regime governing subsidies. Part III discusses the proposed legal solutions to the WTO's green subsidy problem. Part IV compares the proposed solutions and concludes that applying Article XX to the SCM is the best approach.

This paper analyzes renewable energy feed-in tariff (FIT) programmes in the context of World Trade Organization (WTO) subsidy rules. By examining the functioning of the FIT programmes implemented by the Canadian province of Ontario, Germany and the United Kingdom (UK) the paper explores how current subsidy rules may treat FIT programmes. The issue formally entered the halls of the WTO when a dispute was lodged with the WTO's Dispute Settlement Body (DSB) in September 2010 over Ontario's feed-in tariff scheme (Canada-Renewable Energy (Japan)). A second case on the same measure followed in August 2011 (Canada-Feed-in Tariff (EU)). The FIT programme in question contains a controversial local-content provision which requires up to 60% of input of the project to be resourced in Ontario. Japan and the EU argue that this disadvantages producers outside Ontario and amounts to an illegal subsidy. In particular this decision to file the dispute under the WTO's subsidy accord has attracted great attention. In an effort to inform the debate on the matter, the main question that this paper addresses is whether WTO rules, specifically the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), prohibit FIT programmes as illegal subsidies and if so, on which grounds. The paper also assesses whether there are any exceptions available, in particular whether Article XX of the General Agreement on Tariffs and Trade (GATT) could apply.

This contribution illustrates some unresolved issues and tensions that characterize the way the WTO deals with renewable energy subsidies. Indeed, the indisputable urgency to address the negative impacts of climate change on the one hand, and the use of subsidies to boost and support a country's renewable energy sector on the other, provide momentum to better define the legal framework offered by the World Trade Organization (WTO). It is fundamental to ascertain whether the current framework represents an adequate model to address renewable energy subsidies, or whether a more flexible interpretation of WTO Agreements toward sustainable development and the protection of the environment should be adopted instead. In view of that, this paper carefully investigates the evolution of the WTO subsidies disciplines, focusing in particular on the approach of the WTO towards renewable energy subsidies. This article is divided in three sections. The first one offers an overview of WTO disputes involving subsidies in the renewable energy sector, the second one focuses on the recent decisions in the Canada - Renewable Energy and Canada - Feed-in Tariff Program disputes and on some important issues they raise, while in the last one we draw our conclusions.

Despite the myriad tensions existing at the nexus of the international trade and climate change regimes, perhaps more striking are the similarities that exist between the two. Both are recognised as mechanisms designed for pursuing a global good - whether that be increasing wealth or combatting anthropogenic climate change - seemingly providing fertile ground for the conclusion of international agreements, yet both are plagued by political inertia on the international level, destined to do no more than produce rhetoric lauding their final goal. Set against the underwhelming outcome of the Rio 20 conference and the continuation of the Doha Round of negotiations, this article examines one particular example of such inertia encountered at this crucial crossroads - specifically, the framework regulating subsidies for renewable energy in the World Trade Organization (WTO). Whilst the inadequacy of the WTO rules regulating renewable energy subsidies has been evaluated extensively elsewhere, this article instead focuses on a legal analysis that aims to inform the design of subsidies that would not fall foul of the WTO rules as they currently stand. This approach enables implementing states to take all necessary steps to ensure that their subsidies are not vulnerable to legal challenge within the WTO. Taking feed-in tariffs (FITs) as an illustrative example of renewable energy subsidies, the article analyses the pertinent rules of the WTO Agreements, and relevant Dispute Settlement Understanding (DSU) jurisprudence, in order to draw four general principles that should be followed in the design and formulation of renewable energy subsidies; namely, the effective positioning of the subsidy within a larger climate change policy, strict adherence to the principle of non-discrimination, the maintenance of policy links to international standards and agreements, and the institution of transparent and open design, implementation and enforcement processes. Placed against the impasse of the current Doha Round negotiations, the creation of renewable energy subsidies that are impervious to WTO regulation offers a realistic and achievable method of promoting climate change mitigation in international trade.

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.

This article analyzes renewable energy disputes in the World Trade Organization (WTO), explores the specific WTO norms that have been, and are likely to be, engaged by trade-distortive measures that WTO Members may seek to argue have been taken to promote renewables, and advocates implementing stronger governance of energy trade and provides an analysis of the WTO's treatment of renewable energy. It also discusses the impact of subsidies on different forms of energy and whether feed-in tariffs count as subsidies in the WTO context. Our conclusion is that the main obstacles to the scale-up and take-up of renewable energy are not normative/institutional per se. Rather, they are economic. The only systemic 'obstacle' that the WTO presents is its requirement that measures not be disguised mercantilism and that they be applied even-handedly. The WTO system, as it stands, could, and does, accommodate bona fide non-discriminatory measures that promote the scale-up and take-up of renewable energy. After all, we see that it tolerates conventional energy subsidies, which certainly are not predicated on the general exceptions to WTO rules or other dispensations, as these appear in the covered agreements. That said, while the system, as it stands, is considerably flexible towards externalities such as environmental protection objectives, further trade liberalization remains the system's principal objective.

Over the past few years, renewable energy subsidies have become one of the main sources of trade disputes in the WTO. A total of six cases have been initiated against renewable energy subsidy programs since the first of such disputes was brought by Japan against Canada's Feed in Tariff (FIT) program in 2010. Yet not even a single case has so far been initiated against the much larger and environmentally harmful fossil fuel subsidies. The main objective of this paper is to examine what makes renewable energy subsidies vulnerable to WTO dispute, as compared to fossil fuel subsidies.

Over the past few years, renewable energy subsidies have become one of the main sources of trade disputes in the WTO. A total of six cases have been initiated against renewable energy subsidy programs since the first of such disputes was brought by Japan against Canada's Feed in Tariff (FIT) program in 2010. Yet not even a single case has so far been initiated against the much larger and environmentally harmful fossil fuel subsidies. The main objective of this paper is to examine what makes renewable energy subsidies vulnerable to WTO dispute, as compared to fossil fuel subsidies.

Through the use of the recent litigation on renewable energy subsidies in the World Trade Organization ('WTO') as case-study, this paper highlights the importance of methodology in legal analysis and, in particular, of integrity, coherence and legitimacy. Reference is made to those cases where, in presence of pressing policy considerations, the adjudicator is led to commit serious errors in order to reach what is perceived as a just and desirable outcome. It is sometimes the case that adjudicators are called to distinguish a 'good' policy from a 'bad' one, and, if the regulatory framework is not sufficiently responsive to such distinctions, the act of accommodation of law and policy may lead to 'ugly' constructions of the law. The twist of this course of conduct is that the effects of legal interpretation tweaking might not be easily confined to the case at hand and may have broader, negative implications for the legal system at large. Rather than resolving into a simple criticism of adjudicating bodies, the paper argues that the ultimate responsibility for dispute settlement mistakes caused by policy pressures is that of law-makers and their inability to take the lead and reform the law.

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.