The European Union has decided to request WTO consultations with Canada regarding the renewable energy policy of one of its provinces, Ontario, which provides subsidies to producers of renewable energy provided they use domestic technology. This is in clear breach of the WTO rules that prohibit linking subsidies to the use of domestic products.The WTO announced this new case today. I've mentioned the Japan-Canada dispute before, and its details are available here on the WTO website.
The European Union leads the world in the promotion and development of renewable energies, and welcomes the commitment of Ontario to encourage their use. However, the promotion of renewable energies must be done in a manner consistent with international trade rules. The EU believes that the Ontario Green Energy and Economy Act (OGEA) is inconsistent with Canada's WTO obligations. Under the WTO, it is illegal to condition access to a subsidy to the use of domestic products.
The Ontario Green Energy and Economy Act (OGEA) empowers the Ontario Power Authority (OPA) to develop programmes to encourage the use of renewable energy. Under this regime, the OPA has developed a feed-in-tariff (FIT) programme that allows it to buy renewable energy at an above market price. This is a subsidy. In order to benefit from this incentive programme, the OPA has set conditions that favour domestic products and services. As an example, for solar energy 40-50% of the initial costs to develop a project must be made of up products or services from Ontario, rising to 60% for projects developed after 2011; for wind energy these rates amount to 25% for the initial costs, rising to 50% for projects developed after 2012.
Exports from the EU into Canada in wind power and photovoltaic power generation equipment are significant, ranging from 300 to 600 million € in 2007-2009. These figures could be higher should the local content requirements be removed from the legislation in question. The EU is also increasingly concerned by such measures taken by other trading partners. Japan has already initiated WTO dispute settlement in respect of Ontario's measures. The EU initially sought a negotiated solution with Canada, but it was not possible to reach such a solution with Canadian authorities.
More to come, I'm sure.