Wednesday, November 21, 2012

World Trade Organization sides with the EU and Japan and rules against Ontario’s feed-in-tariff local content requirements

The EU and Japan filed complaints against the province of Ontario with the World Trade Organization (WTO), taking the position that the province’s feed-in-tariff (FIT) program breached international trade law by unfairly pressuring generators of renewable energy to purchase equipment and services from companies located in the province of Ontario. WTO judges rejected the EU and Japanese argument that the FIT program provisions constitute an illegal subsidy.

WTO press officer Joseph Bosch confirmed yesterday that the decision was sent to the concerned parties last Friday but that it must remain confidential until all the WTO members receive it “and that could be within the next month."

Ontario Premier Dalton McGuinty declined to comment on the WTO ruling, but he defended a policy that he says is central to creating jobs and boosting manufacturing in a province hit hard by the recent economic downturn. “We have secured some $27 billion worth of investment,” Mr. McGuinty told reporters on Tuesday. “We have the Koreans in here, the Americans in here, the Chinese in here, I think the French and the Germans as well, and that’s not stopping them.”

EU exports to Canada in wind power and photovoltaic power generation equipment are “significant,” according to the Brussels-based European Commission, ranging from 300 million EUR to 600 million EUR between 2007 and 2009.

Aaron Atcheson, an energy lawyer at Miller Thompson in Toronto, said companies in Ontario’s renewable energy sector will not likely be too concerned until the lengthy appeal process is completed. In the meantime he said, there is more risk to the sector from a possible change in government in the province. In the last Ontario election campaign, the opposition Conservative party said it would dismantle the Green Energy Act. There is even a risk to the sector from the upcoming Liberal leadership campaign, Mr. Atcheson said, because some of the candidates will have a different approach to the green energy file from Mr. McGuinty, the outgoing premier. He also said there are so many problems and delays with Ontario’s current green energy program that those practical issues are more pressing for companies than the WTO ruling.

This matter stokes a broader debate over plans by countries including Canada, the United States and China to reserve public works as well as energy and environmental projects worth billions of dollars for local companies. The United States, China, India, and Europe are immersed in a number of increasingly contentious trade disputes over subsidies for wind energy and photovoltaic energy that are likewise alleged to skew the renewable energy playing field. China announced on November 5, 2012 that it was initiating WTO dispute proceedings to challenge what it claims are discriminatory measures in renewable energy programs adopted by certain EU member states such as Italy and Greece. Germany’s law on renewable energy also limits FIT payments for energy originating from installations located in Germany

Source: Globe and Mail, Bloomberg, International Business Times

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