Domestic Content Requirements in the Renewable Energy Sector: What Policy Space Exists Under WTO Rules?

Abstract

This paper seeks to identify domestic content requirements (DCR) in the renewable energy sector (DCR-RE) and describe how it is used by governments; analyze the WTO decisions to date on DCR-RE; and, finally, determine what policy space remains for DCR-RE under WTO. The paper is divided into four parts. Part I briefly describes the content, usage and features of DCR-RE in practice, noting how “local preference” for resources becomes the trigger of trade disputes. In Part II, the paper then summarizes the possible justifications of DCR-RE, which could become the grounds for state defence. Part III discusses all the adjudicated WTO decisions on DCR-RE as of the date of writing, assessing the arguments on whether the DCR-RE has violated the WTO’s cornerstone non-discrimination principles. Considering that DCR-RE emerges from the context of environmental protection, Part IV analyzes the possible approaches to preserve DCR-RE through interpreting WTO rules based on environmental protection.