First WTO Judicial Review of Climate Change Subsidy Issues

Abstract

On May 6, 2013, in the combined reports Canada—Certain Measures Affecting the Renewable Energy Generation Sector and Canada—Measures Relating to the Feed-in Tariff Program (Canada—Renewable Energy/Feed-in Tariff), the Appellate Body of the World Trade Organization (WTO) upheld some key conclusions of a decision of the WTO’s dispute settlement panel (the panel), finding Ontario’s feed-in tariff (FIT) program in violation of certain of Canada’s WTO obligations. The FIT program permits qualified Ontario-based renewable energy producers to enter into long-term fixed-price electricity purchase contracts at premium rates in exchange for feeding into the grid. Japan and the European Union had challenged the program on two grounds: first, that conditioning FIT program eligibility on the use of locally produced materials discriminates against foreign goods, contrary to “national treatment” obligations; and, second, that it constitutes an unlawful subsidy (the provision of a financial contribution by the government that confers a benefit on a specific recipient), contrary to WTO requirements under the Subsidies and Countervailing Measures (SCM) Agreement. While affirming the panel’s decision on the first ground, the Appellate Body reversed its finding on the second, that the complainants had failed to establish a FIT-based “benefit” for electricity producers within the meaning of WTO law. But the Appellate Body itself could not eventually confirm the fact of illegal subsidization.