A Modest Victory at the WTO for Ontario's FIT Program

Abstract

In December 2012 a WTO Panel in Canada – Renewable Energy determined that the domestic content requirements in Ontario’s FIT Program violate the non-discrimination principles articulated in TRIMs Agreement Article II and GATT Article III. However, in a rare split decision the Panel and subsequent Appellant Body afforded Canada a modest victory by determining that Ontario’s FIT program was not a “subsidy” under the SCM Agreement. Nonetheless, the three decisions contain shortcomings that create uncertainty for renewable energy programs under the WTO’s subsidy regime. Specifically, the discordant approaches taken in each of these decisions in relation to the benefit analysis under SCM Agreement Article 1.1(b) raise questions about the role of public policy considerations in the WTO’s subsidy regime. Moreover, where renewable energy programs are challenged as prohibited subsidies, the dissent’s decision would inevitably create an international investment law conflict for the respondent state, a reality that would undoubtedly prove troublesome for states intent on pursuing environmental policies in their energy sectors. Lastly, all three decisions do not provide any guidance on the uncertain relationship between GATT Article XX and the SCM Agreement notwithstanding that Article XX could certainly allow for a broad consideration of environmental policy objectives.