EU and WTO Regulatory Approaches to Renewable Energy Subsidies: Negative and Positive Integration

Abstract

This paper compares how the EU and the WTO have grappled with balancing the negative (trade-distortive) and positive (climate change-mitigation) effects of renewable energy (RE) subsidies. It first shows that, although both subsidy control regimes share some basic tenets of negative integration (i.e. prohibiting tradedistortive RE subsidies), EU State aid law is comparatively more constraining on governments' space to support green energy in both substantive and procedural/institutional terms. It then argues that the more negative integration is strictly framed and implemented, the greater the need for positive integration (i.e., sheltering trade-distortive but climate-friendly RE subsidies under certain conditions). This, in turn, goes a long way in explaining why the EU's regulatory model is also distinct for having progressively established a set of common rules on permissible "good" RE subsidies. With this in mind, the paper assesses the extent to which the absence of a comparable positive integration dimension in the WTO legal framework exposes RE subsidies to the risk of WTO-illegality. It finally argues that while comparing the two regimes may be useful from a theoretical standpoint, a transposition of the EU's positive integration approach to the WTO is not desirable for a variety of legal, political and institutional reasons.