Interim WTO Ruling Finds Canadian Renewable Energy Scheme Discriminatory

According to a confidential interim WTO dispute settlement report, a three-member panel has sided with the EU and Japan in their challenge of renewable energy support provided by the Canadian province of Ontario, sources told BioRes this week. The two countries had argued that the feed-in-tariff (FIT) system – put in place in 2009 – violates WTO rules because it requires participating electricity generators to source up to 60 percent of their equipment in Ontario (see Bridges Trade BioRes, 28 March 2012).

The interim report, circulated to the parties by the panel on 20 September, now confirms the view that the scheme’s “local content requirement” violates the WTO’s non-discrimination principle enshrined in the General Agreement on Tariffs and Trade (GATT) and the WTO Agreement on Trade-Related Investment Measures (TRIMS). However, based on what is currently known about the confidential document, assertions by Brussels and Tokyo that the programme also amounted to illegal subsidies – dependent on use of locally produced equipment – have been rejected. At the time BioRes went to press, the ruling was not available.

The case has been widely portrayed as an environmental dispute, concerning the extent to which authorities can favour domestic producers and suppliers in promoting green energy. At the earlier hearing, however, the arguments from the parties principally focused on the investment aspects of the FIT provisions.

Claimed by Ontarian officials to encourage clean energy production, the local initiative offers incentives to energy producers to use electricity from renewable sources. Provisions of the programme, however, also require that to be eligible for such incentives, renewable energy projects include a minimum quota of goods and services deriving from Ontario – in the case of wind, 25 percent, and for solar projects, 60 percent.

Such a, “discriminatory measure,” said Japan in its statement before the panel in March this year, “is designed to promote the production of renewable energy generation equipment in Ontario rather than to promote the generation of renewable energy.”

Canada, on behalf of Ontario, instead portrayed the measure as government procurement necessary to facilitate a move toward green energy production. If the argument was accepted, the measure would not have been subject to WTO provisions on non-discrimination.

In addition to their arguments that the measures were discriminatory, the EU and Japan also argued that the provisions constituted a prohibited subsidy inconsistent with the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

It is understood that both arguments have now failed, with the Panel ultimately condemning the Ontario rules on the grounds they are discriminatory against foreign suppliers of equipment and components for renewable energy generation facilities.

Both parties have now had an opportunity to submit comments on the interim report. Following the example of most WTO panels to date, however, the panel is not expected to substantially depart from its preliminary findings when it issues its final ruling in November. In a communication from June this year, the panel informed the parties that it expects to finalise its work by late November 2012.

From Bridges Trade BioRes • Volume 12 • Number 17 • 15th October 2012

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About Magdalena A. K. Muir

Magdalena AK Muir, B.A., J.D., LL.M. is Adjunct Professor at John Hopkins University, where she teaches on offshore wind, ocean energy and offshore grid infrastructure marine in the Masters of Science- Energy Policy and Climate program. Magdalena is Associate Professor, Aarhus School of Business and Social Sciences, Aarhus University, and participates in the Nordic Centre of Excellence for Strategic Adaptation Research (NCoE NORD-STAR) on adaptation to climate changes in Scandinavia and the Arctic. She is a Research Associate with Arctic Institute of North America, a bi-national research institution based at the University of Calgary, and teaches on international energy issues at this university. She is a member of the Law Society of Alberta and is a practicing barrister and solicitor with International Energy, Environment and Legal Services Ltd.. For the Arctic, Magdalena collaborates with the University of the Arctic and the Centre for the North Roundtable of the Conference Board of Canada, and is a member of the Global Sustainable Tourism Council. . Since 2004, Magdalena is Advisory Board Member, Climate with the Coastal and Marine Union (EUCC), leading their engagement on sustainable energy development in Europe, including offshore wind and ocean energy and grid infrastucture. She is active on European climate adaptation and mitigation policy, and in the QualityCoast global programme for sustainable tourism destination criteria. Further information on these EUCC activities are found on the EUCC webpage entitled: Articles and Presentations on Adaptation and Mitigation of Climate Change for Biodiversity, Ecosystems, Energy and Water ( Dr. Muir has the following research projects, which are implemented in cooperation with the AINA, John Hopkins University, Duke University, Aarhus University and the NCoE NORD-STAR. - Adaptation Governance for Global and Climate Change in the Circumpolar Arctic - Arctic Resource Development and Climate Impacts, Adaptation, and Mitigation - Beaufort Sea Project for Climate Change: Impact and Adaptation to Climate Change for Fish and Marine Mammals in the Canadian Beaufort Sea - Changing Oceans in a Changing World - The Circum-Arctic Health Project : Northern & Remote Community Health & Resilience Considering Economic & Environmental Changes - Parallels for Arctic and Antarctica Governance and Resource Management - Sustainable Energy Development - Sustainable Tourism See for further information on these projects

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