Abstract
While the Agreements concluded under the umbrella of the WTO are applicable to electricity trade and some PTAs add single important disciplines, the current regulatory framework causes uncertainty and exhibits significant regulatory gaps. Most importantly, the cross-sectoral rules provided by the GATT and the GATS often cannot provide adequate solutions for electricity-specific trade barriers. Another issue facing a more global electricity interconnection is the fragmentation of regulatory regimes. The regional electricity markets that have emerged exhibit a wide variety of regulatory arrangements. Singular relevant provisions in the patchwork of PTAs add to this fragmentation. Starting from the shortcomings regarding specific relevant issues as identified in the previous chapters, the final chapter of this book assesses possible paths ahead for the multilateral regulation of electricity trade.
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Notes
- 1.
The IEC is the standardization organization for the electric and electronic industries. https://www.iec.ch/index.htm.
- 2.
For the opposite view, see Gudas (2018), p. 180, who explicitly recommends to ‘establish an institutional framework for the development of cross-border electricity transmission projects’ and ‘aim to increase the transparency at the planning and development of electricity grids stages’.
- 3.
WTO, Council for Trade in Services, Energy Services – Background Note by the Secretariat (09 September 1998) S/C/W/52, pp. 4 et seq.
- 4.
Cf Albath (2005), p. 85.
- 5.
Cottier et al. (2011), p. 221, speak out in favor of a comprehensive ‘sectoral agreement on energy’ (‘Energy requires an integrated approach and does not lend itself to sectoral negotiations, depending upon different forms of energy applied to competing energy sectors (…). All (these) forms of energy should be subject to the same rules and thus conditions of competition.’). Wälde and Gunst (2004), p. 208, propose a reference paper on energy services and opine that the rules ‘should cover electricity, oil and gas transit; and formulate specific access rules and procedures for interconnectors, storage and transport facilities’. See also Cossy (2012), p. 177 (‘The characteristics of the energy sector would ideally call for a separate WTO Agreement specifically dedicated to energy trade’) (emphasis added).
- 6.
Cottier et al. (2011), p. 221.
- 7.
See, for instance, the Energy Industry Act of Germany (Energiewirtschaftsgesetz) which provides common rules for the gas and electricity sectors. Energy Industry Act of Germany (Energiewirtschaftsgesetz) (1935) RGBl. I S. 1451.
- 8.
The British economist David Ricardo first described his theory of comparative advantage in 1817 in his book ‘On the Principles of Political Economy and Taxation’. Comparative advantage, to Ricardo, implied that specialization and trade between nations under normal conditions raised the income of both. One conclusion deriving from this theory is that a country would only export those goods in which it has a comparative advantage over the country with which it engages in trade (the theory originally only took into account bilateral trade between two countries). A further somewhat paradoxical result is that a country exhibiting a general productivity advantage over the other country would still benefit from trade if it specialized and imported those goods in relation to which its advantage was comparably less pronounced.
- 9.
WTO, European Union and its Member States – Certain Measures Relating to the Energy Sector, Request for Consultations by the Russian Federation (8 May 2014) WT/DS476/1. See also above in Sect. 5.1.2, pp. 90 et seq.
- 10.
- 11.
Ibid, at 1927.
- 12.
This logic, in a somewhat simplified version, consists in reciprocal market access concessions where one country would request access abroad for its own products and in turn offers access for products which it cannot supply at the same rate or quality. This is also reflected in an important facet of WTO dispute settlement: If a dispute settlement organ finds that commitments with respect to a certain good were violated by country A, country B can lawfully retaliate by suspending concessions with respect to a different good. Timothy Meyer calls this ‘a legalized system in which states hold market access to each other’s products hostage.’ See Meyer (2017), p. 16.
- 13.
Cf Zarrilli (2004), p. 253.
- 14.
See above in Sect. 5.2.8, pp. 108 et seq. This was also recognized by the European Union during the GATS negotiations after 2000. In a communication to the Council for Trade in Services, the EU stated that ‘The lack of a comprehensive approach to the classification of energy services is particularly evident now that, after some experiences of liberalisation of energy services throughout the world, the sector is becoming more dynamic and competitive. See WTO, ‘Communication from The European Communities and their Member States on GATS 2000: Energy Services’ (23 March 2001), EU S/CSS/W/60 [I (3)].
- 15.
Zhang (2015), p. 14. This point was also stressed by Japan in a communication to the Council on Trade in Services: ‘The lack of transparency in energy services regulations reduces predictability for trade in the sector. In addition, a system with insufficient transparency leads to increased doubts on the part of those from the outside as to whether trade barriers do exist, thus resulting in a deterioration of market confidence in the country concerned. Accordingly, it is in the interest of all Member Countries to improve the regulatory transparency of energy services.’ WTO, ‘Communication from Japan to the Council on Trade in Services: Negotiating Proposal on Energy Services’ (4 October 2001) S/CSS/W/42/Suppl.3 [6].
- 16.
- 17.
Poretti and Rios-Herran (2006), p. 26.
- 18.
Article XXI:1 (a) reads: ‘A Member (referred to in this Article as the “modifying Member”) may modify or withdraw any commitment in its Schedule, at any time after three years have elapsed from the date on which that commitment entered into force, in accordance with the provisions of this Article.’ The following paragraphs of Article XXI provide for the procedure to be followed for modification or withdrawal.
- 19.
Poretti and Rios-Herran (2006), p. 26.
- 20.
It should again be pointed out that this is contested among academics. For the different view see Cottier et al. (2011), pp. 222-223 who argue that ‘Electricity is a typical network industry, the components of which can best be dealt with following the principles of progressive liberalization and conditionality available under the GATS agreement. It is submitted that electricity should be defined as a service and should no longer be treated as a good’.
- 21.
See above in Sect. 5.2.5, p. 103.
- 22.
See above in Sect. 5.2.8.1, pp. 110 et. seq.
- 23.
Ibid.
- 24.
See above in Sect. 5.2.8, p. 111.
- 25.
On the concept of PPAs see above in Sect. 2.2.6, pp. 35 et seq.
- 26.
Ibid.
- 27.
Of course, one should be aware of the consequence that qualification of the generation process as production of a good would effectively extricate a trillion-dollar industry from services coverage and thereby from possible liberalization under the substantive GATS rules.
- 28.
For a definitional approach see above in Sect. 5.2.1, pp. 94 et seq.
- 29.
This seems to be the logic under the current system of the GATS. As Tilman Dralle argues, ‘measures affecting the transport of energy are fully covered by the applicable GATS disciplines if the transport is carried out on behalf of a third party or third parties. In contrast, the transport of energy does not qualify as a service within the meaning of the GATS if it is merely an ‘in-house’ activity’. According to Dralle, ‘in-house’ would mean transportation within ‘a vertically integrated undertaking that is organized as one legal entity’, but not on behalf of a separate legal entity, even if belonging to the same vertically-integrated undertaking. Dralle (2018), p. 90.
- 30.
See above in Sect. 5.2.8.2, pp. 111 et seq.
- 31.
There does not appear to be a globally accepted common definition of which services exactly the category of ‘ancillary services’ for electricity transmission entails. For one categorization see the overview provided by Deutsche Energie-Agentur (DENA), available at https://www.dena.de/en/topics-projects/energy-systems/electricity-grids/ancillary-services/.
- 32.
Cf Zhang (2005), p. 6.
- 33.
Ibid., at p. 5.
- 34.
See above in Sect. 12.1, p. 199.
- 35.
On ENTSO-E, see above in Sect. 3.2.1.2, p. 50.
- 36.
ENTSO-E, ‘Statistical Yearbook 2011: Glossary of Statistical Terms’, available at https://eepublicdownloads.entsoe.eu/clean-documents/pre2015/publications/entsoe/Statistical_Yearbook/SYB_2011/121216_SYB_2011_5_Glossary_of_statistical_terms.pdf.
- 37.
See above in Sect. 12.2.5, p. 209.
- 38.
Neufeld (2002), p. 8.
- 39.
Commission Regulation (EU) 838/2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging (23 September 2010) OJ 2010/L 250/5.
- 40.
Energy Charter Treaty (17 December 1994) 2080 U.N.T.S. 95, Article 7 (4).
- 41.
See above in Sect. 12.3, p. 211.
- 42.
Cf. Article 214 of the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other part (27 June 2014) OJ 2014/L 261/4, 86. See also above, in Sect. 12.4, pp. 211 et seq.
- 43.
Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (5 June 2019) OJ 2019/L 158/54.
- 44.
Art. 150 of the EU-Kazakhstan EPCA.
- 45.
See above in Chap. 10, pp. 143 et seq.
- 46.
WTO, ‘Communication from Japan to the Council on Trade in Services: Negotiating Proposal on Energy Services’ (4 October 2001) S/CSS/W/42/Suppl.3 (emphasis added).
- 47.
For a similar proposal see Selivanova (2014), p. 204.
- 48.
Zarrilli (2004), p. 235.
- 49.
WTO, Communication from Chile. The Negotiations on Trade in Services, S/CSS/VV/88 (May 2001).
- 50.
WTO, Communication from Cuba. Negotiating Proposal on Energy Services, S/CSS/W/144 (March 2002).
- 51.
WTO, Communication from the European Communities and Their Member States. GATS 2000: Energy Services, S/CSS/W /60 (March 2001).
- 52.
WTO, Communication from Japan, Negotiating Proposal on Energy Services, Supplement, S/CSS/W/42/Suppl.3 (October 2001).
- 53.
WTO, Communication from Norway. The Negotiations on Trade in Services, S/CSS/W/59 (March 2001).
- 54.
WTO, Communication from the United States. Classification or Energy Services, S/CSC/W/27 (May 2000).
- 55.
WTO, Communication from Venezuela. Negotiating Proposal on Energy Services, S/CSS/W/69 (March 2001).
- 56.
UNCTAD, Energy and Environmental Setvices: Negotiating Objectives and Development Priorities (UN 2003) 52, available at https://unctad.org/system/files/official-document/ditctncd20033_en.pdf.
- 57.
Zarrilli (2004), p. 242.
- 58.
See above in Sect. 10.1.2, pp. 155 et seq.
- 59.
Cf Adlung et al (2011), p. 2.
- 60.
Simonetta Zarrilli, Managing Request-Offer Negotiations Under The GATS: The Case of Energy Services’ OECD Trade Directorate TD/TC/WP (2003)24/FINAL, p. 21.
- 61.
EU-Kazakhstan EPCA, Article 145.
- 62.
Ibid.
- 63.
Zarrilli (2004), p. 253.
- 64.
Ibid.
- 65.
Dee and Findlay (2008), p. 353.
- 66.
Reference Paper on Basic Telecommunications Services (24 April 1996) 36 I.L.M. 367 (1997). See also Blouin (2000), p. 138.
- 67.
WTO Reference Paper on Telecommunications (1996), at point 5.
- 68.
See above in Sect. 10.1.1, pp. 150 et seq.
- 69.
On PSOs see above in Sect. 2.2.3, pp. 29 et seq.
- 70.
WTO, Council for Trade in Services, Energy Services – Background Note by the Secretariat (09 September 1998) S/C/W/52 [70].
- 71.
Ibid [70].
- 72.
WTO Reference Paper on Telecommunications (1996). See also Zarrilli (2004), p. 261.
- 73.
Konoplyanik and Wälde (2006), p. 556.
- 74.
- 75.
See above in Sect. 3.2.4.2, pp. 67 et seq.
- 76.
Ibid.
- 77.
Sakmar (2008), p. 99.
- 78.
This concerns Turkmenistan.
- 79.
Marhold (2015), p. 424.
- 80.
Comprehensive and Progressive Agreement for the Trans-Pacific Partnership.
- 81.
- 82.
The former Secretary General of the WTO, Pascal Lamy, promoted this idea by stating: ‘When thinking about how the WTO can most effectively contribute to the energy goals of the international community, the question is not whether the WTO legal framework is relevant and applicable to trade in energy goods and services, for it clearly is. Instead, we need to ask ourselves how the WTO’s contribution can be further improved, given rapid changes in the energy policy landscape and the international community’s goals regarding energy.’ Lamy (2013), p. 121.
- 83.
Marhold (2015), p. 426.
- 84.
Adlung and Mamdouh (2017), p. 7.
- 85.
Agreement Establishing the World Trade Organization (15 April 1994) 1867 U.N.T.S. 154, Article X.
- 86.
Adlung and Mamdouh (2017), p. 8.
- 87.
Agreement on Trade in Civil Aircraft, contained in Annex 4 to the WTO Agreement.
- 88.
Agreement on Textiles and Clothing, contained in Annex 1A to the WTO Agreement, 1868 U.N.T.S. 14 (terminated on 1 January 2005).
- 89.
Agreement on Agriculture, contained in Annex 1A to the Agreement establishing the WTO, 1867 U.N.T.S. 410.
- 90.
WTO, Information Technology Agreement – an Explanation, https://www.wto.org/english/tratop_e/inftec_e/itaintro_e.htm.
- 91.
See WTO, Decision on Negotiations on Basic Telecommunications (15 April 1994) LT/UR/D-5/4.
- 92.
- 93.
Mann and Liu (2008), pp. 188 et seq.
- 94.
Ibid, at 188.
- 95.
Ibid, at 193 f where it is observed that ‘the ITA has been serving as a model for sectoralism.’
- 96.
Blouin (2000), p. 136.
- 97.
Ibid, at 135.
- 98.
Ibid, at 136.
- 99.
Ibid, at 137.
- 100.
Reference Paper on Basic Telecommunications Services (24 April 1996) 36 I.L.M. 367 (1997).
- 101.
Blouin (2000), p. 137.
- 102.
Ibid, at 138 et seq, citing Drake and Noam (1998).
- 103.
Blouin (2000), p. 139 refers to the ‘insurance policy aspect’ created through the certainty and predictability provided by international rules when compared to liberalization at the domestic level alone.
- 104.
It was already pointed out above that Norway and the US each proposed such a reference paper in the request-offer process under the GATS after 2000. For academic commentators discussing a reference paper on energy services see Selivanova (2014), p. 297; Rios Herran and Poretti (2012), pp. 33 et seq; Cossy (2008), p. 168.
- 105.
WTO, Council for Trade in Services, Energy Services – Background Note by the Secretariat (12 January 2010) S/C/W/311.
- 106.
Cf Blouin (2000), p. 140.
- 107.
Cf Selivanova (2015), p. 4.
- 108.
Rios Herran and Poretti (2012), p. 41.
- 109.
Cf Cottier et al. (2011), p. 222 who suggest a framework convention-style approach.
- 110.
Countries might be tempted to support HVDC transmission technology as opposed to AC technology or vice versa because of preferences of their domestic industry.
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Frey, C. (2022). The Road Ahead for Multilateral Electricity Trade Regulation. In: World Trade Law and the Emergence of International Electricity Markets. European Yearbook of International Economic Law(), vol 25. Springer, Cham. https://doi.org/10.1007/978-3-031-04756-5_14
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