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Disciplining Energy Trade

There has long been a misperception that there are no multilateral trade rules that discipline trade in energy across borders. However, while the rules that apply are dispersed over a number of WTO trade agreements, there exist disciplines that serve as the basis for determining whether such trade activities conform to multilateral trade regulations. Energy-related policy measures involve measures that promote easier access to fossil fuel energy or the development of technology for renewable energy generation. The most common policy tool that is used to promote the latter green policy objectives through the development of renewable energy resources are feed-in tariff (FIT) programs. On the other hand, many FIT programs contain local content requirement (LCR) provisions that is based on the governments intention to use green industrial policies to achieve other policy objectives such as economic growth and employment. In a recent WTO dispute case, the FIT program introduced by Canada was challenged as a WTO-inconsistent measure, in particular with the WTO rules on subsidies. However, due to the local content provision in Canadas FIT program, the dispute case did not deal with the FIT program per se, but rather the LCR element of the program that was in clear violation of the GATT/WTO rules. Since the rulings in the case did not product direct evaluation of the green subsidy measure, it remains to be seen if further WTO dispute settlement rulings will continue to be friendly to Member countries green energy policy initiatives.
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