Renewable Energy and WTO - Canada's response in the FIT Program

I had earlier blogged about the FIT program of Ontario, Canada here, here and here. The FIT Program of the Ontario Power Authority essentially encourages power generation projects using renewable sources of energy by providing a guaranteed pricing structure for renewable energy production. As part of this program, to avail its benefits, power generation projects have to source a certain percentage of their products that are produced domestically in Ontario. It has been challenged by the EU and Japan in DS 426   and DS 412.

The Dispute Panel set up to adjudicate on this issue had its first hearing on the 27th of March, 2012 which was open to the public. I have dealt with the assertions of the EU and Japan in my earlier posts which mainly related to it being against the national treatment principle of the GATT and TRIMS as well as violating the SCM Agreement as it was in the nature of a prohibited subsidy.


This comment in the ICTSD website provides the Canadian defence of the FIT program:

"In this week’s meeting, Canada countered that the FIT programme is a form of government procurement designed to ensure the affordable generation of clean energy in Ontario. As such, the programme would be shielded from both GATT national treatment requirements and the TRIMS Agreement provisions being cited in the case. Government procurement is also exempt from the WTO subsidies agreement, provided that it is not conferring a benefit.

The only WTO agreement that specifically addresses such governmental purchases is the plurilateral Government Procurement Agreement (GPA). While Canada is a party to the GPA, the Ontario Power Authority (OPA) - the agency that implements Ontario’s FIT programme - is not covered by Canada’s concessions in the plurilateral pact. As a result, Ontario is under no obligation to grant access to its energy procurement market."

The issues before the Panel are manifold:

1. Is the FIT program violative of the national treatment principle of the GATT and TRIMS Agreements by mandating a "domestic content" requirement and hence favouring domestic producers vis a vis international producers?

2.Is the FIT program in the nature of a government procurement and hence the domestic content requirement does not violate the national treatment principle as per Article 8 of the GATT and the TRIMS Agreement? 

3. Is the FIT program providing a "prohibited subsidy" due to its "domestic content" requirement and hence violative of the SCM Agreement?

The findings of the panel will not only be relevant for developing countries like India and China that have renewable energy programs but also the developed world wherein Governmental support to the renewable energy sector is viewed as a positive imperative for sustainable growth rather than an international law violation.