Abstract
A study prepared for the Swiss Federal Office of Energy (SFOE) The problem of increasing imports of subsidised renewable electricity from neighboring countries and Member States of the EU, undermining level playing fields for traditional hydropower in Switzerland, can be addressed by means of preferential taxation of electricity produced by means of renewable energy. Both under WTO law and the rules of the 1972 Free Trade Agreement, distinctions may be drawn on the basis of non-product related production and process methods, provided the same rules apply to domestic and imported electricity produced with similar methods. Differential taxation can be implemented on the basis of certificates of origin (CO) which need to be made available alike to domestic and foreign producers. A privilege exclusively granted to domestic producers cannot be lawfully sustained. Also, quantitative restrictions of imports cannot be properly justified. The study recommends adopting a system comparable to the UK model of renewable electricity exemption scheme, in place since 2001. It has not been challenged under EU law or under WTO law. To the extent that considerations of industrial policy dominate the motivation, rather than the promotion of green electricity, measures could be adopted on the basis of countervailing duties, offsetting foreign subsidies granted. Also, recourse to safeguard measures, albeit limited in time, can be contemplated. As Switzerland has little experience in taking recourse to trade remedies, a proper methodology taking into account WTO law would need to be developed and communicated in advance. Finally, efforts should be made to address the issue in negotiations with the European Union and Member States. Both unilateral measures relating to differential taxation as well as trade remedies may be used as an argument to bring about a settlement with exporting countries of subsidised electricity.
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