Has the Appellate Body's Decision in Canada - Renewable Energy / Canada - Feed-in Tariff Program Opened the Door for Production Subsidies?

Abstract

In Canada – Renewable Energy / Canada – Feed-in Tariff Program (DS412/DS426), the Appellate Body determined that the ‘benefit’ analysis under Article 1.1(b) of the Agreement on Subsidies and Countervailing Measures (SCM Agreement), in a dispute involving alleged subsidies provided by the Government of Ontario to generators of electricity using wind or solar photovoltaic (PV) technology, should be conducted in separate Ontario markets for wind and solar PV electricity, rather than in the single Ontario market for electricity as a whole. This article argues that the Appellate Body’s determination in this regard was flawed because it was not grounded in a proper interpretation of the treaty term ‘benefit’; instead, it exhibited a bias on the part of the Appellate Body to exempt government support for renewable electricity from the disciplines of the SCM Agreement. However, as a result of the Appellate Body’s decision, it may be permissible for WTO Members to provide trade-distorting subsidies for inefficient production technologies, particularly for commodity products, without fear of repercussions under the SCM Agreement.