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Canada–Renewable Energy: Implications for WTO Law on Green and Not-So-Green Subsidies

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  • Charnovitz, Steve
  • Fischer, Carolyn

    (Resources for the Future)

Abstract

In the first dispute on renewable energy to come to World Trade Organization (WTO) dispute settlement, the domestic content requirement of Ontario’s feed-in tariff was challenged as a discriminatory investment-related measure and as a prohibited import substitution subsidy. The panel and Appellate Body agreed that Canada was violating the GATT and the TRIMS Agreement. But the SCM Article 3 claim by Japan and the European Union remains unadjudicated, because neither tribunal made a finding that the price guaranteed for electricity from renewable sources constitutes a ‘benefit’ pursuant to the SCM Agreement. Although the Appellate Body provides useful guidance to future panels on how the existence of a benefit could be calculated, the most noteworthy aspect of the new jurisprudence is the Appellate Body’s reasoning that delineating the proper market for ‘benefit’ analysis entails respect for the policy choices made by a government. Thus, in this dispute, the proper market is electricity produced only from wind and solar energy.

Suggested Citation

  • Charnovitz, Steve & Fischer, Carolyn, 2014. "Canada–Renewable Energy: Implications for WTO Law on Green and Not-So-Green Subsidies," RFF Working Paper Series dp-14-38, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-14-38
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    References listed on IDEAS

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    6. Aaron Cosbey & Petros C. Mavroidis, 2014. "A Turquoise Mess: Green Subsidies, Blue Industrial Policy and Renewable Energy: The Case for Redrafting the Subsidies Agreement of the WTO," Journal of International Economic Law, Oxford University Press, vol. 17(1), pages 11-47.
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    10. Steven Sorrell, 2003. "Carbon Trading in the Policy Mix," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(3), pages 420-437.
    11. Carolyn Fischer & Mads Greaker & Knut Einar Rosendahl, 2014. "Robust Policies against Emission Leakage: The Case for Upstream Subsidies," CESifo Working Paper Series 4742, CESifo.
    12. Steve Sorrell, 2003. "Interactions between the EU Emissions Trading Scheme and the UK Renewables Obligation and Energy Efficiency Commitment," Energy & Environment, , vol. 14(5), pages 677-703, September.
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    Cited by:

    1. Fischer, Carolyn & Greaker, Mads & Rosendahl, Knut Einar, 2017. "Robust technology policy against emission leakage: The case of upstream subsidies," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 44-61.
    2. Bougette, Patrice & Charlier, Christophe, 2015. "Renewable energy, subsidies, and the WTO: Where has the ‘green’ gone?," Energy Economics, Elsevier, vol. 51(C), pages 407-416.
    3. Carolyn Fischer, 2017. "Environmental Protection for Sale: Strategic Green Industrial Policy and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 553-575, March.
    4. Ornelas, Emanuel & Puccio, Laura, 2020. "Reopening Pandora's Box in Search of a WTO-Compatible Industrial Policy? The Brazil–Taxation Dispute," World Trade Review, Cambridge University Press, vol. 19(2), pages 249-266, April.
    5. Fischer, Carolyn & Greaker, Mads & Rosendahl, Knut Einar, 2018. "Strategic technology policy as a supplement to renewable energy standards," Resource and Energy Economics, Elsevier, vol. 51(C), pages 84-98.
    6. Sohag, Kazi & Islam, Md. Monirul & Hammoudeh, Shawkat, 2024. "From policy stringency to environmental resilience: Unraveling the dose-response dynamics of environmental parameters in OECD countries," Energy Economics, Elsevier, vol. 134(C).
    7. Denis A. Lavrov & Svetlana V. Karpova & Vladimir I. Avdiyskiy & Svetlana E. Dubova & Svetlana V. Makar & Natalia A. Barmenkova & Nataliya A. Kazakova & Nikolay P. Kushchev, 2021. "Green Electricity and Heat Generation in Canada: Implications for Russia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 280-289.
    8. Fischer, Carolyn, 2016. "Strategic Subsidies for Green Goods," RFF Working Paper Series dp-16-12, Resources for the Future.
    9. Nelson, Douglas & Puccio, Laura, 2021. "Nihil novi sub sole: The Need for Rethinking WTO and Green Subsidies in Light of United States – Renewable Energy," World Trade Review, Cambridge University Press, vol. 20(4), pages 491-508, October.
    10. Ornelas, Emanuel & Puccio, Laura, 2019. "Reopening Pandora’s Box in Search of a WTO-Compatible Industrial Policy? The Brazil -Taxation Dispute," CEPR Discussion Papers 14042, C.E.P.R. Discussion Papers.
    11. Michelle Limenta & Lili Yan Ing, 2022. "Indonesia’s Local Content Requirements: Assessment with WTO Rules," Working Papers DP-2021-47, Economic Research Institute for ASEAN and East Asia (ERIA).
    12. Bown,Chad P. & Crowley,Meredith A & Bown,Chad P. & Crowley,Meredith A, 2016. "The empirical landscape of trade policy," Policy Research Working Paper Series 7620, The World Bank.
    13. Kayla Stan & Graham A. Watt & Arturo Sanchez-Azofeifa, 2021. "Financial stability in response to climate change in a northern temperate economy," Nature Communications, Nature, vol. 12(1), pages 1-10, December.
    14. Harri Kalimo & Filip Sedefov & Max S. Jansson, 2017. "Market definition as value reconciliation: the case of renewable energy promotion under the WTO Agreement on Subsidies and Countervailing Measures," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(3), pages 427-443, June.
    15. Julie L. MacArthur, 2017. "Trade, Tarsands and Treaties: The Political Economy Context of Community Energy in Canada," Sustainability, MDPI, vol. 9(3), pages 1-20, March.

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    More about this item

    Keywords

    feed-in tariff; renewable energy; subsidies; international trade; WTO; green growth; local content requirement;
    All these keywords.

    JEL classification:

    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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