Explaining energy disputes at the World Trade Organization
- 662 Downloads
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.
KeywordsClimate change Fossil fuels Renewable energy Subsidies WTO
Antidumping and countervailing duty
Dispute Settlement Body
Group of 20
General Agreement on Tariffs and Trade
International Energy Agency
Organization of Petroleum Exporting Countries
Agreement on Subsidies and Countervailing Measures
World Trade Organization
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.
- Bast, E., Doukas, A., Pickard, S., van der Burg, L., & Whitley, S. (2015). Empty promises: G20 subsidies to oil, gas, and coal production. Washington, DC: Oil Change International and Overseas Development Institute.Google Scholar
- Bown C. P., & Reynolds, K. M. (2014). Trade flows and trade disputes. World Bank Research Group, Policy Research working paper 6979. Washington, DC: World Bank.Google Scholar
- Carrington, D. (2015). Carbon reserves held by top fossil fuel companies soar. The Guardian.Google Scholar
- Clark, D. (2012). Phasing out fossil fuel subsidies could provide half of global carbon target. The Guardian.Google Scholar
- Esanov, A. (2012). Economic diversification: Dynamics, determinants and policy implications. Revenue Watch Institute, 1–26.Google Scholar
- GATT. (1988). Japan—Trade in semi-conductors. Report of the Panel, L/6309–35S/116 (4 May 1988).Google Scholar
- Guzman, A. T. (1998). Why LDCs sign treaties that hurt them: Explaining the popularity of bilateral investment treaties. Virginia Journal of International Law, 38(4), 639–688.Google Scholar
- Helfer, L. R. (2004). Regime shifting: The TRIPs agreement and the new dynamics of international intellectual property lawmaking. Yale Journal of International Law, 29(1), 1–83.Google Scholar
- Helm, S., Tannock, Q., & Iliev, I. (2014). Renewable energy technology: Evolution and policy implications—Evidence from patent literature. Geneva: World Intellectual Property Organization.Google Scholar
- Hestermeyer, H. P., & Nielsen, L. (2014). The legality of local content measures under WTO law. Journal of World Trade, 48(3), 553–591.Google Scholar
- Horn, H., Mavroidis, P. C., & Nordström, H. (2005). Is the use of the WTO dispute settlement system biased? In P. C. Mavroidis & A. Sykes (Eds.), The WTO and international trade law/dispute settlement (pp. 454–483). Cheltenham: Edward Elgar.Google Scholar
- IMF. (2014). The diversification toolkit: Export diversification and quality databases. https://www.imf.org/external/np/res/dfidimf/diversification.htm.
- Knoema. (2016). BP: World reserves of fossil fuels. http://knoema.com/smsfgud/bp-world-reserves-of-fossil-fuels.
- Lamy, P. (29, April 2013). Remarks to the workshop on the role of intergovernmental agreements in energy policy. World Trade Organization. http://www.wto.org/english/tratop_e/envir_e/wksp_envir_apr13_e/wksp_envir_apr13_e.htm.
- Meyer, T. (2015). How local discrimination promotes global public goods. Boston University Law Review, 96(6), 1939–2027.Google Scholar
- Neufeld, I. N. (2001). Anti-dumping and countervailing procedures—Use or abuse? Implications for developing countries. New York and Geneva: United Nations Commission on Trade and Development.Google Scholar
- Nikou, S. N., & Glenn, C. (2015). The subsidies conundrum. United States Institute of Peace. http://iranprimer.usip.org/resource/subsidies-conundrum.
- Nwapi, C. (2016). A survey of the literature on local content policies in the oil and gas industry in East Africa. University of Calgary School of Public Policy technical paper 9.Google Scholar
- Pogoretskyy, V. (2011). Energy dual pricing in international trade: Subsidies and anti-dumping perspectives. In Y. Selivanova (Ed.), Regulation of energy in international trade law: WTO, NAFTA and Energy Charter (pp. 181–228). Alphen aan den Rijn: Kluwer Law International.Google Scholar
- Selivanova, Y. (2010). Managing the patchwork of agreements in trade and investment. In A. Goldthau & J. M. Witte (Eds.), Global energy governance: The new rules of the game (pp. 49–72). Washington, DC: Brookings Institution Press.Google Scholar
- Stefanini, S. (2008). Bill says OPEC’s WTO members breach trade laws. LAW360. http://www.law360.com/articles/55011/bill-says-opec-s-wto-members-breach-trade-laws.
- Tran, M. (2003). Bush lifts steel tariffs to avert trade war. The Guardian.Google Scholar
- UNEP. (2016). Fossil fuel subsidies policy brief. Geneva: UNEP.Google Scholar
- WTO. (1996). United States—Standards for reformulated and conventional gasoline. Appellate Body Report, WT/DS2/AB/R (20 May 1996).Google Scholar
- WTO. (2002). India—Measures affecting the automotive sector. Report of the Panel, WTO/DS146 (5 April 2002).Google Scholar
- WTO. (2010). China—Measures concerning wind power equipment—Request for consultations by the United States. WT/DS419/1 (22 December 2010).Google Scholar
- WTO. (2012a). China—Measures related to the exportation of various raw materials. Reports of the Appellate Body, WT/DS394/AB/R, WT/DS395/AB/R, WT/DS398/AB/R (22 February 2012).Google Scholar
- WTO. (2012b). European Union and certain member States—Certain measures affecting the renewable energy generation sector—Request for consultations, WT/DS451/1 (5 November 2012).Google Scholar
- WTO. (2013a). Canada—Certain measures affecting the renewable energy generation section-Canada—Measures relating to the feed-in tariff program. Reports of the Appellate Body, WT/DS412/AB/R, WT/DS426/AB/R (6 May 2013).Google Scholar
- WTO. (2013b). European Union—Anti-dumping measures on biodiesel from Argentina—Request for Consultations, WT/DS473/1 (19 November 2013).Google Scholar
- WTO. (2014a). China—Measures related to the exportation of rare earths, tungsten, and molybdenum. Reports of the Appellate Body, WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R (29 August 2014).Google Scholar
- WTO. (2014b). European Union—Anti-dumping measures on biodiesel from Indonesia—Request for consultations, WT/DS480/1 (10 June 2014).Google Scholar
- WTO. (2015). International Trade Statistics 2015. https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf.
- WTO. (2016a). Chronological list of disputes cases. https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm.
- WTO. (2016b). Dispute settlement: Disputes by country/territory. https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm.
- WTO. (2016c). European Union—Anti-dumping measures on biodiesel from Argentina. Panel report, WT/DS473/R (29 March 2016).Google Scholar
- WTO. (2016d). India—Certain measures related to solar cells and solar modules. Report of the panel, WT/DS456/R (14 February 2016).Google Scholar
- WTO. (2016e). United States—Certain measures relating to the renewable energy sector—Request for consultations. WT/DS510/1 (2016).Google Scholar