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 trade-distortive 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.