The Subsidization of Renewable Energy in the WTO: Issues and Perspectives
47 Pages Posted: 27 Sep 2011
Date Written: September 26, 2011
Abstract
This article attempts to answer various questions. It starts by asking whether renewable energy, which plays a crucial role in the mitigation of climate change, is in need of public support, and, if so, what guidelines should be followed to ensure its efficiency in relation to its goals. Assuming that certain subsidies to support renewable energy may be ‘good’, the central question, which occupies much of the analysis, is whether the current regulatory framework, notably WTO subsidy disciplines, does recognize appropriate autonomy to domestic measures of support. The scenario is one of diffuse legal uncertainty. On the one hand, for various reasons, some of the most common measures of support of renewable energy still have an unclear status under the legal definition of subsidy of the SCM Agreement. Further, energy markets are significantly regulated and distorted, which adds up to the difficulty of determining whether a certain action does confer a benefit or may cause adverse effects. A crucial claim is that the uncertainty of the legal assessment produces a constraint on policy space. Further, beside legal uncertainty, some of the legal standards show how the perspective of trade rules, based on principles of general applicability, neutrality and non-discrimination, may be different from, and indeed at odds with, the policy and best practice prescriptions which seem to favour specific and targeted interventions. The conclusion is that the current WTO subsidy rules are not satisfactory. This conclusion supports the case for a legal shelter that, in a clear and positive way, would define what types of government interventions are legitimate and what are not. In the absence of specific rules, the applicability of GATT Article XX to such measures has emerged as a credible but controversial alternative. Only a new discipline of legitimate renewable energy subsidies, however, would enable to tailor the new exceptions to the needs of justification in the most appropriate way. In this regard, a blueprint for law reform and few guidelines (transparency, synergy of hard and soft governance, sense of community) have been sketched, and the possibility of using the EU law on State aid as source of inspiration considered.
Keywords: subsidy, renewable energy, WTO, policy space
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