Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-24T18:54:40.709Z Has data issue: false hasContentIssue false
  • English
  • Français

Nihil novi sub sole: The Need for Rethinking WTO and Green Subsidies in Light of United States – Renewable Energy

Published online by Cambridge University Press:  22 June 2021

Douglas Nelson  and
Laura Puccio
Douglas Nelson*
Affiliation:
Murphy Institute and Department of Economics, Tulane University, New Orleans, USA
Laura Puccio
Affiliation:
European University Institute, Fiesole, Italy
*
*Corresponding author, Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

US–Renewable Energy is the last in a series of WTO disputes involving subsidies schemes with local content requirements. Local content requirements (LCRs) are highly discriminatory and trade distortive instruments and therefore all cases concerning green energy have been found to violate WTO law. However, recent jurisprudence has developed a different definition of prohibited LCRs under the GATT and the SCM agreement, the latter allowing for some leeway to define origin of products under a government subsidy scheme. Depending how the subsidy scheme is framed, it will be able to be excused from the GATT's more stringent prohibition of LCRs, this raises question of consistency in the application of the LCRs prohibition. Moreover, we review a simple and robust approach that modern welfare economics suggests for framing discussions of subsidy policy. We apply this approach to the case of renewable energy subsidies and discuss some complexities with respect to local content requirements. In conclusion, this allows us to critically assess and review proposals to increase coherence between WTO subsidy policy and green energy promotion policies and submit proposals to achieve better suited WTO subsidy rules.

Keywords

WTO lawrenewable energysubsidieslocal content requirementsgreen taxationgreen energy promotion
Type
Original Article
Information
World Trade Review , Volume 20 , Special Issue 4: WTO Case Law , October 2021 , pp. 491 - 508
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Asmelash, H.B. (2015) ‘Energy Subsidies and WTO Dispute Settlement: Why Only Renewable Energy Subsidies Are Challenged’, Journal of International Economic Law 18(2), 261–285.CrossRefGoogle Scholar
Bagwell, K. and Staiger, R. (2002) The Economics of the World Trading System. Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Bagwell, K. and Sykes, A.O. (2005) ‘India – Measures Affecting the Automotive Sector’, World Trade Review 4(S1), 158–178.CrossRefGoogle Scholar
Baldwin, R.E. (2016) The Great Convergence: Information Technology and the New Globalization. Cambridge. MA: The Belknap Press of Harvard University Press.Google Scholar
Batra, M. and Bafna, N. (2018) ‘Renewable Energy: The WTO's Position on Local Context Requirements’, Energy Law Journal 39(2), 401–426.Google Scholar
Beghin, J., Roland-Holst, D., and Van Der Mensbrugghe, D. (1997) ‘Trade and Pollution Linkages: Piecemeal Reform and Optimal Intervention’, The Canadian Journal of Economics 30(2), 442–455.CrossRefGoogle Scholar
Celli, U. Jr. (2019) ‘The Impact of WTO Case Law on the Use of Local Content Requirements’, in A. d. Amaral Junior et al. (eds.), The WTO Dispute Settlement Mechanism. Switzerland: Springer.Google Scholar
Charnovitz, S. (2014) Green Subsidies and the WTO. Washington. DC: World Bank Group.CrossRefGoogle Scholar
Charnovitz, S. and Fischer, C. (2015) ‘Canada–Renewable Energy: Implications for WTO Law on Green and Not-So-Green Subsidies’, World Trade Review 14(2), 177–210.CrossRefGoogle Scholar
Chau, N.H., Färe, R., and Grosskopf, S. (2013) ‘Trade Restrictiveness and Pollution’, Journal of Public Economic Theory 15(1), 25–52.CrossRefGoogle Scholar
Chipman, J.S. and Moore, J.C. (1973) ‘Aggregate Demand, Real National Income, and the Compensation Principle’, International Economic Review 14(1), 153–181.CrossRefGoogle Scholar
Chipman, J.S. and Moore, J.C. (1976) ‘Why an Increase in GNP Need Not Imply an Improvement in Potential Welfare’, Kyklos 29(3), 391–418.CrossRefGoogle Scholar
Coenen, D.T. (1998) ‘Business Subsidies and the Dormant Commerce Clause’, The Yale Law Journal 107(4), 965–1053.CrossRefGoogle Scholar
Copeland, B.R. (1994) ‘International Trade and the Environment: Policy Reform in a Polluted Small Open Economy’, Journal of Environmental Economics and Management 26(1), 44–65.CrossRefGoogle Scholar
Cosbey, A. and Mavroidis, P.C. (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 17(1), 11–47.CrossRefGoogle Scholar
Diewert, W.E., Turunen-Red, A.H., and Woodland, A.D. (1989) ‘Productivity- and Pareto-Improving Changes in Taxes and Tariffs’, Review of Economic Studies 56(2), 199–215.CrossRefGoogle Scholar
Eliason, A. (2019) ‘Using the WTO to Facilitate the Paris Agreement: A Tripartite Approach’, Vanderbilt Journal of Transnational Law 52(3), 545–575.Google Scholar
Green, A. (2005) ‘Climate Change, Regulatory Policy and the WTO: How Constraining Are Trade Rules?’, Journal of International Economic Law 8(1), 143–189.CrossRefGoogle Scholar
Green, A. (2006) ‘Trade Rules and Climate Change Subsidies’, World Trade Review 5(3), 377–414.CrossRefGoogle Scholar
Grossman, G.M. (1981) ‘The Theory of Domestic Content Protection and Content Preference’, The Quarterly Journal of Economics 96(4), 583–603.CrossRefGoogle Scholar
Grossman, G.M. and Horn, H. (2013) ‘Why the WTO?: An Introduction to the Economics of Trade Agreements’, in Horn, H. and Mavroidis, P.C. (eds.), Legal and Economic Principles of World Trade Law. Cambridge: Cambridge University Press/The American Law Institute, 9–67.CrossRefGoogle Scholar
Hartmut, K. (2014) ‘Local-Content Requirements in Renewable Energy Support Schemes From a Trade Law Perspective’, in Squintani, L., Vedder, H., Vanheusden, B., and Reese, M. (eds.), Sustainable Energy United in Diversity: Challenges and Approaches in Energy Transition in the EU, European Environmental Law Forum. Groningen: Environmental Law Forum Book Series, 219–236.Google Scholar
Hatta, T. (1977) ‘A Theory of Piecemeal Policy Recommendations’, The Review of Economic Studies 44(1), 1–21.CrossRefGoogle Scholar
Hestermeyer, H.P. and Nielsen, L. (2014) ‘The Legality of Local Content Measures under WTO Law’, Journal of World Trade 48(3), 553–591.Google Scholar
Hoekman, B.M. and Nelson, D.R. (2020) ‘Rethinking International Subsidy Rules’, World Economy 43(12), 3104–3132.CrossRefGoogle Scholar
Hufbauer, G.C., Schott, J.J., Cimino, K., Vieiro, M., and Wada, E. (2013) Local Content Requirements: A Global Problem. Washington. DC: Peterson Institute for International Economics.Google Scholar
Karttunen, M.B. (2020) Transparency in the WTO SPS and TBT Agreements: The Real Jewel in the Crown. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Karttunen, M. and Moore, M.O. (2018) ‘India – Solar Cells: Trade Rules, Climate Policy, and Sustainable Development Goals’, World Trade Review 17(2), 215–237.CrossRefGoogle Scholar
Kuntze, J.-C. and Moerenhout, T.S.H. (2014) ‘Are Feed-in Tariffs Schemes With Local Content Requirements Consistent with WTO Law?’, in Baetens, F. and Caiado, J. (eds.), Frontiers of International Economic Law: Legal Tools to Confront Interdisciplinary Challenges. Leiden, Netherlands: Brill Nijhoff, 151–180.Google Scholar
Lee, J. (2016) ‘SCM Agreement Revisited: Climate Change, Renewable Energy, and the SCM Agreement’, World Trade Review 15(4), 613–644.CrossRefGoogle Scholar
Lipsey, R.G. and Lancaster, K. (1956) ‘The General Theory of Second Best’, The Review of Economic Studies 24(1), 11–32.CrossRefGoogle Scholar
Marhold, A.-A. (2017) EU State-Aid Law, WTO Subsidy Disciplines and Renewable Energy Support Schemes: Disconnected Paradigms in Decarbonising the Grid. Tilburg, Netherlands: Tilburg University, Tilburg Law and Economics Centre.Google Scholar
Marín Durán, G. (2018) ‘Sheltering Government Support to “Green” Electricity: The European Union And The World Trade Organization’, International and Comparative Law Quarterly 67(1), 129–165.CrossRefGoogle Scholar
Mussa, M. (1993) ‘The Economics of Content Protection’, in Salvatore, D. (ed.), Protectionism and World Welfare. Cambridge: Cambridge University Press, 266–289.CrossRefGoogle Scholar
Nelson, D.R. (1989) ‘The Domestic Political Preconditions of US Trade Policy: Liberal Structure and Protectionist Dynamics’, Journal of Public Policy 9(1), 83–108.CrossRefGoogle Scholar
Ornelas, E. and Puccio, L. (2020) ‘Reopening Pandora's Box in Search of a WTO-Compatible Industrial Policy?’, The Brazil–Taxation Dispute. World Trade Review 19(2), 249–266.CrossRefGoogle Scholar
Raslan, R.A.A. (2018) ‘Green Subsidies and WTO Trade Rules: A “Conflict of Values” or A “Conflict of Norms”’, Journal of World Trade 52(6), 917–942.Google Scholar
Rodrik, D. (2011) The Globalization Paradox: Democracy and the Future of the World Economy. New York: W.W. Norton & Co.Google Scholar
Rodrik, D. (2017) Straight Talk on Trade: Ideas for a Sane World Economy. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Rubini, L. (2012) ‘Ain't Wastin’ Time No More: Subsidies for Renewable Energy, The SCM Agreement, Policy Space, and Law Reform’, Journal of International Economic Law 15(2), 525–579.CrossRefGoogle Scholar
Rubini, L. (2014) ‘The Good, the Bad, and the Ugly-Lessons on Methodology in Legal Analysis from the Recent WTO Litigation on Renewable Energy Subsidies’, Journal of World Trade 48(5), 895–938.Google Scholar
Rubini, L. (2015a) ASCM Disciplines and Recent WTO Case Law Developments: What Space for ‘Green’ Subsidies? Florence: Robert Schuman Centre, European University Institute.Google Scholar
Rubini, L. (2015b) ‘“The wide and the narrow gate”’: Benchmarking in the SCM Agreement after the Canada–Renewable Energy/FIT Ruling’, World Trade Review 14(2), 211–237.CrossRefGoogle Scholar
Stephenson, S. (2013) Addressing Local Content Requirements in a Sustainable Energy Trade Agreement. Geneva, Switzerland: International Centre for Trade and Sustainable Development.Google Scholar
Turunen-Red, A.H. and Woodland, A.D. (2004) ‘Multilateral Reforms of Trade and Environmental Policy’, Review of International Economics 12(3), 321–336.CrossRefGoogle Scholar
Zhang, Z.X. and Assunção, L. (2004) ‘Domestic Climate Policies and the WTO’, The World Economy 27(3), 359–386.CrossRefGoogle Scholar