FEEM working papers "Note di lavoro" series
2014 .088

Renewable Energy, Subsidies, and the WTO: Where Has the ‘Green’ Gone?


Authors: Patrice Bougette, Christophe Charlier
Series: Climate Change and Sustainable Development
Editor: Carlo carraro
Keywords: Feed-in Tariffs, Subsidies, Local Content Requirement, Industrial Policy, Canada – Renewable Energy Dispute, Trade Policy
JEL n.: F18, L52, Q42, Q48, Q56

Abstract

Faced with the energy transition imperative, governments have to decide about public policy to promote renewable electrical energy production and to protect domestic power generation equipment industries. For example, the Canada – Renewable energy dispute is over Feed-in tariff (FIT) programs in Ontario that have a local content requirement (LCR). The EU and Japan claimed that FIT programs constitutesubsidies that go against the SCM Agreement, and that the LCR is incompatible with the non-discrimination principle of the World Trade Organization (WTO). This paper investigates this issue using an international quality differentiated duopoly model in which power generation equipment producers compete on price. FIT programs including those with a LCR are compared for their impacts on trade, profits, amount of renewable electricity produced, and welfare. When ‘quantities’ are taken into account, the results confirm discrimination. However, introducing a difference in the quality of the power generation equipment produced on both sides of the border provides more mitigated results. Finally, the results enable discussion of the question of whether environmental protection can be put forward as a reason for subsidizing renewable energy producers in light of the SCM Agreement.

***

Suggested citation: Bougette, P., C. Charlier, (2014), 'Renewable Energy, Subsidies, and the WTO: Where Has the ‘Green’ Gone?' , Nota di Lavoro 88.2014, Milan, Italy: Fondazione Eni Enrico Mattei

Download file
Download PDF file

FEEM Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree