Renewable Energy Subsidies and WTO Law: Time to Rethink the Case for Reform Beyond Canada – Renewable Energy/Fit Program

Abstract

Since the Canada – Renewable Energy/FIT Program (2013) dispute at the World Trade Organization (WTO), it has become almost conventional wisdom in the literature that a clash exists between international climate change mitigation goals and WTO law, with a growing consensus (if not anxiety) that WTO subsidy rules ought to be reformed in order to safeguard ‘policy space’ for government support to renewable energy. It is contended here that, in several ways, such a call for reform has been misconceived and needs to be recalibrated. This is mainly because the case for reform has been seldom evaluated in light of State practice beyond that particular WTO dispute, nor informed by an in-depth assessment of how different green energy subsidies will fare under existing WTO subsidy disciplines. Our aim here is to fill this gap in the existing literature. In particular, our analysis shows that the main problem is neither feed-in tariffs per se, nor the multilateral disputes that have been brought before the WTO dispute settlement bodies. For this reason, we argue that the applicability of Article XX GATT to the Agreement on Subsidies and Countervailing Measures (SCM Agreement), which has been often suggested in the scholarship, is not the solution towards ensuring greater supportiveness between international trade and climate change regimes. In fact, such an avenue will provide no legal shelter for those climate-friendly energy subsidies that have actually been at a higher risk under current WTO rules (i.e., through unilateral remedial action). Conversely, the other common proposal of introducing a specific exemption into the SCM Agreement for certain ‘good’ RE subsidies appears most effective from a mutual supportiveness perspective, but faces considerable political and practical hurdles at the present junction.