Renewable energy is becoming the focus of international trade disputes.  The first shoe to drop occurred when Canada’s largest province, Ontario, was accused by Japan and the European Union of  favouring local companies to construct wind farms and solar projects.   Now we have a report out of Australia suggesting that its efforts to introduce a carbon tax by providing compensation to carbon emitting industries may amount to simply a form of “protectionism” for domestic industries.

In 2010 Japan filed a complaint with the World Trade Organization (WTO) claiming that Ontario’s feed–in-tariff (FIT) to encourage the production of renewable energy discriminated against imported equipment in violation of Canada’s WTO commitments.  To obtain the subsidies from Ontario to construct renewable energy projects,  firms had to purchase as much as 60 per cent of their equipment from local suppliers. Recently, the European Union filed a similar complaint with the WTO (See here).  In July of this year the WTO established a panel to hear the complaints.

At the other end of the Earth, Australia is hoping to introduce a carbon tax next summer to enable it to reach its green house gas emission targets.  In putting together a policy to achieve its objectives and to get its legislation passed, the government chose to assist high C02 emitting industries by offering them financial compensation for a limited time period to allow them to adjust to the new economic environment.  The compensation is targeted at the coal, steel and liquefied natural gas companies, the firms most affected by the introduction of the carbon tax.

Today an independent think tank, The Grattan Institute, issued a report saying that the government’s generous compensation package could be a disguised from of protectionism.

Grattan Institute’s analysis of these sectors shows that the proposed level of assistance is not only unjustified, but reverts to a form of industry protection largely discredited and abandoned in recent times.

…the draft legislation… adopts the wrong reason for assistance: industry protection…The proposed assistance may be necessary for an overall political compromise. Yet it is vital to environmental effectiveness and economic efficiency that the draft legislation is changed to avoid outcomes distorted by unjustified industry claims or leading to a new era of protectionism.

Climate Spectator has a summary of the issues and the highlights of the Gratton report. (CO2 compensation, or protectionism?)  You can download the report here.

Undoubtedly we will hear more of these kind of stories as more and more countries put in place policies to encourage the rapid growth of renewable energy.

 

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1 Comment on Green Energy and Trade Protection

  1. […] Ontario’s actions have not gone over well with suppliers in other countries and both Japan and the European Union have launched complaints against Canada at the World Trade Organization (WTO) which polices illegal trade policies.  (Earth’s Energy reported on these actions here.) […]