Renewable Energy Subsidies and WTO Law: Time to Rethink the Case for Reform Beyond Canada – Renewable Energy/Fit Program

Abstract

Since the Canada-Renewable Energy/FIT Program (2013) dispute at the World Trade Organization (WTO), it has become almost conventional wisdom in the scholarship that a clash exists between international climate change mitigation goals and WTO law, with a growing consensus (if not anxiety) that WTO subsidy rules ought to be reformed in order to safeguard 'policy space' for government support to renewable energy. It is contended here that, in several ways, such a call for reform has been misconceived and needs to be recalibrated. This is mainly because the case for reform has been seldom evaluated in light of State practice beyond that particular WTO dispute, nor informed by an in-depth assessment of how different clean energy subsidies will fare under existing WTO subsidy disciplines. Our aim here is to fill this gap in the existing literature. In particular, our analysis shows that the main problem is neither feed-in tariffs per se, nor the multilateral disputes that have been brought before the WTO dispute settlement bodies. For this reason, we argue that the applicability of Article XX GATT to the Agreement on Subsidies and Countervailing Measures (SCM Agreement), which has been often suggested in academic writings, is not the solution towards ensuring greater supportiveness between international trade and climate change regimes. In fact, such an avenue will provide no legal shelter for those climatefriendly energy subsidies that have actually been at a higher risk under current WTO rules (i.e. through unilateral remedial action). Conversely, the other common proposal of introducing a specific exemption into the SCM Agreement for certain 'good' renewable energy subsidies appears most effective from a mutual supportiveness perspective, but faces considerable political and practical hurdles at the present junction.

Trade Protectionism & China’s International Trade Disputes: Renewable Energy Perspectives

“…28 Energy was not considered by the GATT when it was first formed in 1947. 29 The omission of energy as a distinct sector was explained by former WTO Director-General Pascal Lamy, who stated that: "[w]hen the rules of the GATT -which preceded the WTO -were negotiated 60 years ago, opening trade in energy was not a political priority. World energy demand was a fraction of today, and you could buy a barrel of crude oil for USD 20 at current prices."…”

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

“…137 Finally, and significantly, the need for more stringent transparency and notification requirements, on the one hand, and stricter procedural safeguards to avoid abuses, on the other hand, is also extensively reiterated. 138 Some of the difficulties inherent to pre-determining sufficiently calibrated criteria for carving out RE subsidies would be overcome through recourse to a general exception clause à la Article XX GATT, whose conditions would be formulated in general terms and interpreted flexibly on a case-by-case basis by a multilateral but non-political decision-maker -i.e., the WTO adjudicatory bodies. 139 A strand of the literature has even argued in favour of making Article XX GATT itself applicable to ASCM-inconsistent subsidies.…”

Reopening Pandora's Box in Search of a WTO-Compatible Industrial Policy? TheBrazil–TaxationDispute

“… 2 For example, there is a large literature on whether certain programs aimed at promoting renewables are justifiable under WTO law. See, for example, Rubini (2012), Espa and Duran (2013), Charnovitz and Fischer (2015), and Batra and Bafna (2018). …”

“…See, for example,Hestermeyer and Nielsen (2014) andSauvé (2016).3 For example, there is a large literature on whether certain programs aimed at promoting renewables are justifiable under WTO law. See, for example,Rubini (2012),Espa and Duran (2013),Charnovitz and Fischer (2015) andBatra and Bafna (2018).4 The parties agreed to establish a joint procedure, which generated a single joint Panel report: Brazil -Certain Measures concerning Taxation and Charges (hereafter Brazil -Taxation), WT/DS472/R and WT/DS497/R, adopted on 30 August 2017.5 For the full list of laws, decrees and implementing orders, see section 2.2 of the panel report.6 The Economics literature has also analysed in detail the (typically negative) economic effects of LCRs, the main challenged measures in industrial programmes under WTO law. See, in particular,Grossman (1981),Bagwell and Sykes (2005), andConconi and Schepel (2017).…”