Why are Renewable Energy Subsidies Vulnerable Under WTO Law? And Why Does It Matter?

Abstract

The recent 21st Conference of the Parties concluded with the adoption of the Paris Agreement. This Agreement incorporated into the legal framework of the UNFCCC, inter alia, the unilateral pledges that 187 out of the 196 countries in the world have made in the form of Intended Nationally Determined Contributions (INDC) aimed at holding global average temperature to well below 2°C above pre-industrial levels. While meeting these INDCs is not obligatory per se, Article 4 of the Paris Agreement obliges parties to adopt the domestic mitigation measures that are necessary to achieve the objectives pursued by their intended contributions. To this end, and given the cost and necessity of transitioning from fossil fuels to renewable energy, a large number of domestic and international funds in the form of subsidies will have to be deployed to finance this transition. The way in which governments are currently subsidizing their industries, however, seems to be inconsistent with the disciplines of the WTO. This article discusses the question of why renewable energy subsidies are vulnerable to WTO disputes and ultimately seeks to explain how governments can accommodate their renewable energy subsidy programs to avoid that they are challenged at the WTO dispute settlement level.