Nihil novi sub sole. The need for rethinking WTO and green subsidies in light of United States – Renewable Energy

29 Pages Posted: 9 Apr 2021

See all articles by Douglas Nelson

Douglas Nelson

Tulane University - Department of Economics

Laura Puccio

European Parliamentary Research Service

Date Written: March 2021

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: Local content, subsidies, renewable energy, WTO rules, environmental policy.

Suggested Citation

Nelson, Douglas R. and Puccio, Laura, Nihil novi sub sole. The need for rethinking WTO and green subsidies in light of United States – Renewable Energy (March 2021). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2021/32, Available at SSRN: https://ssrn.com/abstract=3821671 or http://dx.doi.org/10.2139/ssrn.3821671

Douglas R. Nelson (Contact Author)

Tulane University - Department of Economics ( email )

New Orleans, LA 70118
United States

Laura Puccio

European Parliamentary Research Service ( email )

Brussels
Belgium

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