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Explaining energy disputes at the World Trade Organization

  • Timothy Meyer
Original Paper

Abstract

The international trade regime has seen an explosion of challenges to government support for renewable energy in recent years, yet fossil fuel subsidies, which dwarf renewable energy subsidies, have remained unchallenged. Existing explanations for this puzzling discrepancy have focused on four rationales: major fossil fuel exporters have not historically been members of the General Agreement on Tariffs and Trade/World Trade Organization (WTO); WTO subsidies rules are inadequate to deal with the specifics of the fossil fuel trade; nations have developed separate institutions to govern energy; and all states have fossil fuel subsidies, so a challenge to one country’s subsidies will prompt a reciprocal challenge. This article makes two contributions. First, it uses a survey of existing renewable energy trade disputes to critique the existing explanations. Most importantly, the article shows that the threat of reciprocal litigation exists in the renewable energy sector, and that WTO subsidies rules are rarely used to challenge renewable energy subsidies. Hence, neither the threat of reciprocal litigation nor the relative ease of applying WTO subsidies rules explains the discrepancy in the number of disputes. Second, the article hypothesizes that the economic diversification of energy-producing countries is correlated with and may drive whether energy-producing countries face WTO challenges to their energy support policies. Most major fossil fuel producers lack significant non-fossil fuel exports that could be restricted in order to induce them to reform their fossil fuel policies, the usual mechanism for enforcing a WTO judgment. States may also be more likely to challenge new, rather than long-standing, trade restrictions. This suggests that trade challenges will arise more frequently where innovation leads to competition and a demand for new trade restrictions (as in renewable energy), as opposed to in mature sectors of the economy (i.e., the fossil fuel industry). Economic diversification, in turn, is a good predictor of innovation.

Keywords

Climate change Fossil fuels Renewable energy Subsidies WTO 

Abbreviations

AD/CVD

Antidumping and countervailing duty

DSB

Dispute Settlement Body

EU

European Union

FIT

Feed-in tariff

G20

Group of 20

GATT

General Agreement on Tariffs and Trade

IEA

International Energy Agency

NT

National treatment

OPEC

Organization of Petroleum Exporting Countries

PV

Photovoltaic

SCM

Agreement on Subsidies and Countervailing Measures

US

United States

WTO

World Trade Organization

Notes

Acknowledgements

For helpful comments, the author thanks Harro van Asselt, Amandine Orsini, Thijs Van de Graaf, and participants at the REFRACT Workshop on Energy Subsidies. Thanks to Demetrios Festa for research assistance.

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Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  1. 1.Vanderbilt University Law SchoolNashvilleUSA

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