Trade Disputes over Renewable Energy Supporting Policies: Recent Cases, WTO Rules, and Possible Solutions

Increasing concerns about climate change impacts and the high oil prices have made many countries include promoting renewable energy use their national sustainable development strategies. One frequently mentioned barrier to increasing the transition toward renewable energy in many countries is lack of funding – in most cases energy from cleaner sources are also more expensive.

And who pays for the GHG emission reductions is the top reason behind the stalemate of the international climate negotiations. Developing countries are requesting large financial support from developed countries for their climate change mitigation actions under the principle of ‘common but differentiated responsibilities’.

So it would be logic to assume that if a country helps lower the prices of renewable energy technologies and somehow subsidies the renewable energy use in other countries, such efforts will be more than welcome, even so when such effort comes from a developing country. But it is not true in real life.

The longing for renewable energy sometimes gives way to countries’ competition for leadership in clean technologies or companies’ competition for market shares. In 2010 two trade disputes have arisen under the WTO, for wind energy supporting policies. Recently, Japan has a trade dispute against Canada related to renewable energy equipment in Ontario.

The American United Steelworkers are calling for their government to penalise China for grants to Chinese wind turbine and key component manufacturers. This paper will examine the interfaces between various wind energy supporting policies and the WTO trade rules. Some trade disputes will be used as case studies to explain the reasons behind such disputes.

Suggestions will be provided on how to avoid such disputes in practice.