Renewable Energy and WTO Subsidy Rules: The Feed-In Tariff Scheme of Switzerland

Mayoraz, Jean-François

doi:10.1007/978-3-319-44645-5_10

Jean-François Mayoraz⁶

1441 Accesses

Abstract

In recent years, States around the world have been starting to facilitate the production of renewable electricity by providing subsidies to producers in order to address climate change. As a consequence, policy makers have been developing various forms of instruments to support renewable electricity production. Amongst them, a popular tool is the feed-in tariff (FIT), which is currently used by around 73 countries.

Switzerland is one of the 73 countries, which has been using a FIT-scheme as an instrument to support the production of renewable electricity since 2009. According to art 7a.1 of the Swiss Energy Act network operators are obliged to take all electricity from producers of renewable electricity and to compensate them with a fixed tariff. With the new energy strategy 2050 the State support of renewable energy has become even more important. Interestingly, renewable energy composes already a majority of the total electricity production in Switzerland, namely from hydropower.

This research aims to contribute to the current discussion of the compatibility of FIT-schemes with WTO subsidy rules. By analysing Switzerland’s FIT-program, the research question is asked whether the current WTO subsidy regime allows Switzerland enough policy space to pursue its objective to raise its production of green electricity by using a FIT-program.

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Notes

1.
REN21 (2015), p. 88.
2.
Mendonça et al. (2010), p. xxi.
3.
Waldner and Rechsteiner (2012), para 7.
4.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, Appellate Body Report, Canada – Certain Measures Affecting the Renewable Energy Generation Sector, Canada – Measures Relating to the Feed-In Tariff Program, 6 May 2013; WTO doc. WT/DS412/R, WT/DS426/R, Panel Report, Canada – Certain Measures Affecting the Renewable Energy Generation Sector, Canada – Measures Relating to the Feed-In Tariff Program, 12 December 2012.
5.
Federal Administration (2008).
6.
See for options Shadikhodjaev (2015), pp. 493 ff.
7.
Arts 1 and 2 SCM Agreement.
8.
WTO doc. WT/DS273/R, Panel Report, Korea – Measures Affecting Trade in Commercial Vessels, 11 April 2005, para 7.50.
9.
WTO doc. WT/DS379/AB/R, Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, 25 March 2011, para 320, referring to the Panel Report.
10.
Ibid., para 317.
11.
WTO doc. WT/DS296/AB/R, Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, 20 July 2005, para 113; WTO doc. WT/DS257/AB/R, Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, 17 February 2004, para 52.
12.
WTO doc. WT/DS296/AB/R, supra, n. 11, para 116.
13.
WTO doc. WT/DS414/R, Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States, 16 November 2012, para 7.84.
14.
WTO doc. WT/DS299/R, Panel Report, European Communities – Countervailing Measures on Dynamic Random Access Memory Chips from Korea, 3 August 2005, para 7.176.
15.
WTO doc. WT/DS70/AB/R, Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, 20 August 1999, para 157.
16.
WTO doc. WT/DS316/AB/R, Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, 1 June 2011, para 900.
17.
WTO doc. WT/DS257/AB/R, supra, n. 11, para 103.
18.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, para 5.188.
19.
Local content requirement concerns seem to be the most common issue why complainants challenge State measure promoting renewable energy. See Asmelash (2015), p. 284, Leal-Arcas and Filis (2014) and Meyer (2013).
20.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, para 5.75 ff.
21.
WTO doc. WT/DS412/R, WT/DS426/R, supra, n. 4, paras 8.6-7; WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, paras 5.79, 5.84 and 6.1.
22.
WTO doc. WT/DS412/R, WT/DS426/R, supra, n. 4, paras 7.231–7.239.
23.
Ibid., para 7.234.
24.
Ibid., paras 7.169–7.185, 7.223–7.241.
25.
See WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, para 5.130. The Appellate Body acknowledged that art 14 SCM Agreement offers different methods for calculating the amount of a subsidy depending on the type of financial contribution.
26.
WTO doc. WT/DS412/R, WT/DS426/R, supra, n. 4, para 7.322.
27.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, para 5.178.
28.
Ibid., para 5.178.
29.
Ibid., para 5.188.
30.
Ibid.
31.
Ibid., para 5.190. The Appellate Body held that a benchmark price could be found by finding some market with the same characteristics as in Ontario. This might seem to be an unlikely event but it shows that the Appellate Body has not completely closed the door for demonstrating that a governmental creation of a new market amounts to a subsidy.
32.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, para 5.246.
33.
Rubini (2011), p. 23; Jerijian (2012), p. 10; Cottier et al. (2011), p. 226; Bigdeli (2009), p. 169.
34.
Cosbey and Mavroidis (2014), p. 26.
35.
Article XVIII(c) states an exception for infant industries, which is limited for use by developing countries only.
36.
Pal (2014), p. 136.
37.
Shadikhodjaev (2013), p. 875.
38.
Cosbey and Mavroidis (2014), p. 27; Pal (2014), p 134.
39.
Cosbey and Mavroidis (2014), p. 29.
40.
The exact number of existing power companies is vague: the Association of Swiss Electricity Companies has over 400 Members, which produce, distribute and trade 90 % of the electricity in Switzerland. See http://www.strom.ch/de/verband/mitglieder.html (German) (accessed 31 January 2016).
41.
Besides Switzerland, only few countries such as Norway and Austria dispose a high share of hydropower too. In Norway 96 % and in Austria 66 % of electricity is produced from hydropower. Both countries dispose no nuclear energy sources. See Swiss Federal Office for Energy (2015a), pp. 2–3, 7.
42.
Swiss Federal Office for Energy (2015b), p. 6.
43.
Swiss Constitution, art 89.1.
44.
Swiss Constitution, art 89.3.
45.
Classified Compilation (SR) 730.0.
46.
Classified Compilation (SR) 730.01.
47.
Energy Act, art 1.
48.
See Energy Act, arts 1.2(c), 3.1(b) and 5.3.
49.
Federal Gazette (BBl) 2004 1661, p. 1667.
50.
Energy Ordinance, art 1(f); the same wording is used in art 4.1(c) of the Energy Supply Act.
51.
Federal Gazette (BBl) 2013 7561, p. 7623.
52.
Classified Compilation (SR) 734.7.
53.
Energy Supply Act, art 13.3(c).
54.
Federal Gazette (BBl) 2013 7561, p. 7657.
55.
Swiss Federal Office for Energy (2011).
56.
See for the objectives of the new Energy Strategy 2050: Federal Gazette (BBl) 2013 7561, pp. 7593–7594.
57.
Federal Gazette (BBl) 2013 7561, p. 7624.
58.
Energy Act, art 7a.
59.
Energy Act, art 7a, last sentence.
60.
Energy Act, art 7a.
61.
Energy Act, art 7a.4.
62.
Energy Act, art 7a.2.
63.
See for the current tariffs Annex 1.1–1.5 of the Energy Ordinance.
64.
The guaranteed length of the support depends on the technology. See Annex 1.1–1.5 of the Energy Ordonnance for more details.
65.
Energy Act, art 15b paras 4 and 5.
66.
Swiss Federal Office for Energy (2015c).
67.
Energy Ordinance, art 3 g.
68.
A balance group is an energy account. See Swissgrid (2015).
69.
Energy Supply Ordinance, art 24.
70.
Swiss Federal Office for Energy (2008).
71.
The market price is defined by the Swiss Federal Office for Energy. See: Energy Ordinance, art 3b^bis.
72.
The total production of electricity from renewable energy (excluding hydropower) sources shall be at 4400 GWh by 2020 and by 2035 at 14’500 GWh. With regard to hydropower, the production shall reach at least 37’400 GWh by 2035. See: Federal Gazette (BBl) 2013 7561, p. 7594.
73.
Federal Gazette (BBl) 2013 7561, p. 7625. This system is somewhat a combination of the tariff system with incentives for participation in the conventional market and demand-oriented tariff-differentiation as described in Mendonça et al. (2010), pp. 42–43.
74.
Federal Gazette (BBl) 2013 7561, p. 7594.
75.
Swiss Federal Office for Energy (2014), p. 2.
76.
Swiss Federal Office for Energy (2013).
77.
Federal Gazette (BBl) 2013 7561, p. 7625; Swiss Federal Office for Energy (2014), p. 6.
78.
Federal Gazette (BBl) 2013 7561, p. 7625.
79.
Swiss Federal Office for Energy supra, n. 75, p. 8.
80.
Neue Zürcher Zeitung (2014).
81.
Shadikhodjaev (2013), pp. 869–870.
82.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, paras 5.118–5.139.
83.
Art 1.1(a)(1)(iv) SCM Agreement.
84.
Hettich and Walther (2011), p. 164; Zlatanov (2009), p. 65; Pinelli (2014), p. 160.
85.
Art 1.1(a)(2) SCM Agreement. See Bigdeli (2009), pp. 171–172; dissenting opinion in Howse (2005), p. 22.
86.
WTO doc. WT/DS412AB/R, WT/DS426/AB/R, supra, n. 4, para 5.169; Bigdeli (2009), p. 170.
87.
As shown, Switzerland limits the FIT-program to hydropower facilities with a capacity up to 10 MW. Therefore, this conclusion underlies the assumption that electricity produced from these facilities compete in the same market as hydropower electricity from larger hydropower stations.
88.
See also Coppens (2014), p. 461.

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Institute of Law, University of Zurich, Zurich, Switzerland
Jean-François Mayoraz

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Department of International, Legal, Historical and Political Studies, University of Milan, Milan, Italy
Giovanna Adinolfi
Faculty of Law, University of Leiden, Leiden, The Netherlands
Freya Baetens
Doctoral College of Law and Economics, University of Hamburg, Hamburg, Germany
José Caiado
Department of International, Legal, Historical and Political Studies, University of Milan, Milan, Italy
Angela Lupone
Department of International, Legal, Historical and Political Studies, University of Milan, Milan, Italy
Anna G. Micara

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Mayoraz, JF. (2017). Renewable Energy and WTO Subsidy Rules: The Feed-In Tariff Scheme of Switzerland. In: Adinolfi, G., Baetens, F., Caiado, J., Lupone, A., Micara, A. (eds) International Economic Law. Springer, Cham. https://doi.org/10.1007/978-3-319-44645-5_10

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DOI: https://doi.org/10.1007/978-3-319-44645-5_10
Published: 30 December 2016
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