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EU and WTO Regulatory Approaches to Renewable Energy Subsidies: Negative and Positive Integration

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Positive Integration - EU and WTO Approaches Towards the "Trade and" Debate

Part of the book series: European Yearbook of International Economic Law ((Spec. Issue))

Abstract

This paper compares how the EU and the WTO have grappled with balancing the negative (trade-distortive) and positive (climate change-mitigation) effects of renewable energy (RE) subsidies. It first shows that, although both subsidy control regimes share some basic tenets of negative integration (i.e. prohibiting trade-distortive RE subsidies), EU State aid law is comparatively more constraining on governments’ space to support green energy in both substantive and procedural/institutional terms. It then argues that the more negative integration is strictly framed and implemented, the greater the need for positive integration (i.e., sheltering trade-distortive but climate-friendly RE subsidies under certain conditions). This, in turn, goes a long way in explaining why the EU’s regulatory model is also distinct for having progressively established a set of common rules on permissible “good” RE subsidies. With this in mind, the paper assesses the extent to which the absence of a comparable positive integration dimension in the WTO legal framework exposes RE subsidies to the risk of WTO-illegality. It finally argues that while comparing the two regimes may be useful from a theoretical standpoint, a transposition of the EU’s positive integration approach to the WTO is not desirable for a variety of legal, political and institutional reasons.

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Notes

  1. 1.

    United Nations Framework Convention on Climate Change (UNFCCC), signed on 9 May 1992, 771 U.N.T.S. 107, Article 2; Paris Agreement, signed on 12 December 2015, Article 2(1)(a), further providing “[…] and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels”.

  2. 2.

    Paris Agreement, ibid., Articles 3 and 4(2); International Renewable Energy Agency (IRENA) Rethinking Energy 2017: Accelerating the Global Energy Transformation (2017), https://www.irena.org/documentdownloads/publications/irena_rethinking_energy_2017.pdf (last accessed 2 June 2019), pp. 23–24. This is because the energy sector is still contributing to more than two thirds of global GHG emissions: see International Energy Agency (IEA) Energy, Climate Change and the Environment: 2016 Insights (2016), https://www.iea.org/publications/freepublications/publication/ECCE2016.pdf (last accessed 2 June 2019), p. 17.

  3. 3.

    The case for government intervention is made on the basis of both the climate-related benefits (or positive externalities) of green energy and the climate-related costs (or negative externalities) of conventional energy: see, inter alia, Marín Durán (2018), pp. 133–134. According to latest estimates, renewable energy subsidies rose to USD 140 billion in 2016, although this is still lower than fossil-fuel subsidies which amounted to USD 260 billion in that same year. IEA Commentary: Fossil-fuel Consumption Subsidies Are Down, But Not Out (20 December 2017), https://www.iea.org/newsroom/news/2017/december/commentary-fossil-fuel-consumption-subsidies-are-down-but-not-out.html (last accessed 2 June 2019).

  4. 4.

    In 2015, the electricity sector still accounted for approximately 40% of global energy-related GHG emissions due to the heavy reliance on fossil fuels: IEA (2017), CO2 Emissions from Fuel Combustion: Highlights, https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data (last accessed 2 June 2019), p. 13.

  5. 5.

    Renewable Energy Policy Network for the 21st Century (REN21), Renewable 2016 Global Status Report (2016), https://www.ren21.net/wp-content/uploads/2019/05/REN21_GSR2016_FullReport_en_11.pdf (last accessed 2 June 2019), p. 112.

  6. 6.

    A detailed examination of countries’ policy practice is beyond the scope of this article, see inter alia: Espa and Marín Durán (2018), pp. 623–628 and references therein.

  7. 7.

    Intergovernmental Panel on Climate Change (IPCC) Renewable Energy Sources and Climate Change Mitigation – Summary for Policy Makers and Technical Summary (2012), https://www.ipcc.ch/site/assets/uploads/2018/03/SRREN_Full_Report-1.pdf (last accessed 2 June 2019), p. 152, outlining the main elements of “well-designed” FIT programmes; see also Charnovitz and Fischer (2015), p. 184, referring to estimates that FITs are responsible for about 75% of global solar PV and 45% of global wind capacity.

  8. 8.

    For an overview, REN21 (2013), Renewables 2013 – Global Status Report, http://www.ren21.net/Portals/0/documents/Resources/GSR/2013/GSR2013_lowres.pdf (last accessed 2 June 2019), pp. 68–70; and REN21 (2016), Renewables 2016 – Global Status Report, https://www.ren21.net/wp-content/uploads/2019/05/REN21_GSR2016_FullReport_en_11.pdf (last accessed 2 June 2019), p. 8.

  9. 9.

    IEA (2015), Energy and Climate Change – World Energy Outlook Special Report, https://www.iea.org/publications/freepublications/publication/WEO2015SpecialReportonEnergyandClimateChange.pdf (last accessed 2 June 2019), pp. 13 and 85.

  10. 10.

    The present contribution focuses exclusively on the treatment of RE subsidies under EU State aid law. For a discussion in relation to EU internal market law (particularly Articles 34 and 36 TFEU), including recent case law, see E. Reid’s contribution to this special issue.

  11. 11.

    See further Bacon (2013), pp. 20–87.

  12. 12.

    Articles 1.1(a)(1)(i)-(iii) and 1.1(a)(2) ASCM.

  13. 13.

    Article 1.1(a)(1)(iv) ASCM.

  14. 14.

    Article 1.1(b) ASCM.

  15. 15.

    Articles 1.2 and 2 ASCM. As this does not differ fundamentally from the notion of “selectivity” under EU State aid law, it will not be further discussed here: for a comparison, see Ehlermann and Goyette (2006), pp. 701–704.

  16. 16.

    Admittedly, there is one exception to this general proposition in that the notion of “subsidy” under WTO law may in some respects be broader than that of “State aid” under EU law. This is because only measures that are both imputable to a Member State and financed directly or indirectly through “State resources” may be regarded as State aid under EU law. On this “cost to government” (or “charge on the public account”) requirement, see in particular: Case C-379/98 PreussenElektra [2001] ECR I-2099, paras. 58–62 and discussion in Ramirez Carmona (2016), pp. 222–224. By contrast, no similar “cost to government” requirement exists under WTO subsidy law: WTO Appellate Body Report, Canada — Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 19 November 1999, para. 154, rejecting Canada’s argument that “cost to government” is one way of conceiving the existence of a “benefit” under Article 1.1(b) ASCM. On this point, see further Marín Durán (2018), p. 141.

  17. 17.

    WTO Appellate Body Report, Canada — Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 19 November 1999, para. 157 and Articles 14(b)-(d) ASCM; Ehlermann and Goyette (2006), pp. 700–701.

  18. 18.

    European Commission Notice on the Definition of Relevant Market for the Purposes of Community Competition Law’ (97/C372 /03), OJ [1997] C372/5, para. 1, footnote 1, noting that “[t]he focus of assessment in State aid cases is the aid recipient and the industry/sector concerned rather than identification of the competitive constraints faced by the aid recipient.” This distinguishes State aid cases from competition cases in EU law, as in the latter both demand-side and supply-side substitutability may be considered: see further, Rubini (2015), pp. 219–220.

  19. 19.

    Factors suggesting a high demand-side substitutability between renewable and conventional electricity include that all electricity is physically identical and performs the same end-use regardless of how it is generated: on this point see, WTO Appellate Body Report, Canada — Certain Measures affecting the Renewable Energy Generation Sector/Measures relating to the Feed-in Tariff Program, WT/DS412/DS426/AB/R, adopted 24 May 2013 [hereinafter Appellate Body Report, Canada – Renewable Energy (2013)], para. 5.170; and further discussion in Charnovitz and Fischer (2015), pp. 201–202.

  20. 20.

    See e.g., in relation to feed-in tariffs under the German EEG Act, European Commission State aid SA.38632 (2014/N) – Germany. EEG 2014 – Reform of the Renewable Energy Law (C(2014) 5081 final), 23 July 2014, paras. 121 and 149.

  21. 21.

    A reference to the main academic critiques is given in Espa and Marín Durán (2018), pp. 634–635.

  22. 22.

    Appellate Body Report, Canada – Renewable Energy/FIT Program (2013), para. 5.174.

  23. 23.

    Appellate Body Report, Canada – Renewable Energy/FIT Program (2013), para. 5.178.

  24. 24.

    Appellate Body Report, Canada – Renewable Energy/FIT Program (2013), paras. 5.175-85.

  25. 25.

    Appellate Body Report, Canada – Renewable Energy/FIT Program (2013), para. 5.190.

  26. 26.

    Appellate Body Report, Canada – Renewable Energy/FIT Program (2013), paras. 5.228 and 5.233. See further, Rubini (2015), pp. 218–220.

  27. 27.

    Note that the Appellate Body’s approach to the benefit analysis in Canada – Renewable Energy (2013) concerned the legal standard in Article 14(d) ASCM and hence it is applicable to FIT programmes as a “purchase of goods” by the government, but not to other forms of public support listed in Article 1.1(a) ASCM (e.g., tax exemptions, grants or preferential loans). For further discussion, see Espa and Marín Durán (2018), pp. 633 and 639.

  28. 28.

    On this point see Flett et al. (2008), pp. 447–449.

  29. 29.

    See further, Bacon (2013), pp. 12–13 and 82–87.

  30. 30.

    Article 3 ASCM. For a more detailed examination, see van den Bossche and Zdouc (2017), pp. 802–810.

  31. 31.

    Articles 5(a) and 15 ASCM, referring to “material injury”, or threat thereof, to the domestic industry of another member producing the like product. For a more detailed examination, see van den Bossche and Zdouc (2017), pp. 811–817.

  32. 32.

    Articles 5(c) and 6.3 ASCM, referring to “serious prejudice”, or threat thereof, to the interests of another member, including by “displacing or impeding” imports of a like product into the market of the subsidising member, or by “displacing or impeding” exports of a like product into the market of a third country, or by resulting in “significant” price undercutting, price suppression, price depression or loss of sales. For a more detailed examination, see van den Bossche and Zdouc (2017), pp. 818–837.

  33. 33.

    On the discriminatory effects of LCRs see, among others, Hestermeyer and Nielsen (2014), pp. 553–591. On the limited evidence regarding their added environmental benefits, see Kuntze and Moerenhout (2013), Local Content Requirements and the Renewable Energy Industry – A Good Match?, https://pdfs.semanticscholar.org/6872/7a8d62a9722b28a250bef0470aeb847108f9.pdf (last accessed 2 June 2019), pp. 1–2, 31–35 and 43–44.

  34. 34.

    According to the International Energy Agency, while steadily increasing, global imports of electricity in 2015 (726 TWh) only amounted to about 3.5% of the world’s total electricity consumption (20200 TWh): IEA Electricity Information: Overview (2017), pp. 5 and 7–8, https://www.iea.org/publications/freepublications/publication/ElectricityInformation2017Overview.pdf (last accessed 2 June 2019).

  35. 35.

    On how the distinction among RE subsidies based on the product being subsidized (namely, electricity vs. green technology products) has a bearing on the trade-distortive effects analysis under the ASCM, see Sect. 4 below.

  36. 36.

    Article 108 TFEU; and Council Regulation (EU) No 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 TFEU, OJ [2015] L248/9.

  37. 37.

    Article 108(3) TFEU. One exception to this general rule is provided in: Commission Regulation (EU) No 1407/2013 on the application of Articles 107 and 108 TFEU to de minimis aid, OJ [2013] L352/1. For all covered sectors (Article 1), State aid may be granted up to a ceiling of €200,000 per single undertaking over any period of three fiscal years, or €100,000 in the road transport sector (Article 3). Any such de minimis aid is deemed not to distort competition nor affect intra-EU trade, and thus it does neither meet the criteria of Article 107(1) TFEU nor does it need to be notified under Article 108(3) TFEU.

  38. 38.

    By contrast, WTO remedies are prospective, probably reflecting the idea that the system is designed primarily to protect current and future trade flows: Flett et al. (2008), p. 449.

  39. 39.

    For a more detailed examination, see Bacon (2013), chapter 18.

  40. 40.

    Article 24.1 ASCM.

  41. 41.

    Article 25.9 to Article 25.11 ASCM.

  42. 42.

    Articles 25.1 and 25.2 ASCM.

  43. 43.

    According to a recent report prepared by the WTO Secretariat, the status of subsidy notifications has significantly deteriorated over the years 1995–2015. In the words of the Secretariat: “…the share of Members that notified subsidies decreased from 50% to 38% since 1995. In addition, the share of Members that made a ‘nil’ notification fell significantly, from 25% to 10%, in the same period. Thus, with the exception of 1995, the share of Members making the required notifications has not exceeded 63%, and generally has hovered around 58%. Conversely, the share of Members not making any notification registered an important increase since 1995, from 25% to 52%…”. WTO Committee on Subsidies and Countervailing Measures, Notification Requirements under the Agreement on Subsidies and Countervailing Measures – Background Note by the Secretariat, G/SCM/W/546/Rev.8, 31 March 2017, pp. 3–4.

  44. 44.

    Many authors have stressed the need to correct for the absence of a systematic reporting and suggested new templates for WTO subsidy notifications. See, among others, Steenblik and Simon (2010).

  45. 45.

    See, e.g. Horlick and Clarke (2017), p. 697.

  46. 46.

    See Articles 4 and 7 ASCM.

  47. 47.

    See Part V ASCM. This unilateral track is only available in the case of subsidies causing “material injury” to the domestic industry within the meaning of Article 5(a) ASCM.

  48. 48.

    Horlick and Clarke (2017), p. 689.

  49. 49.

    For more details, see Espa and Marín Durán (2018), pp. 629–630.

  50. 50.

    Kampel (2017), p. 12.

  51. 51.

    Note that the introductory words of Article 107(1) TFEU (“save as otherwise provided in the Treaties”) make clear that the prohibition is not absolute.

  52. 52.

    In addition, the Council acting on a proposal from the Commission may introduce further derogations if needed: Article 107(3)(d) TFEU.

  53. 53.

    Automatic compatibility includes State aid: having a social character (Article 107(2)(a)); necessary to make good the damage caused by natural disasters or exceptional occurrences (Article 107(2)(b)); and granted to the economy of certain areas of Germany affected by the cold war division (Article 107(2)(c)). In these cases, the Commission has no discretion as to whether or not to authorize the aid, but merely ascertains that the conditions set out in Article 107(2) TFEU are fulfilled. See further, Bacon (2013), pp. 95–100.

  54. 54.

    Discretionary compatibility includes: cohesion aid (Article 107(3)(a)); aid to important projects of common European interest or to remedy a serious disturbance in the economy of a Member State (Article 107(3)(b)); and aid to promote culture and heritage conservation (Article 107(3)(d)). See further, Bacon (2013), pp. 100–113.

  55. 55.

    Blauberger M (2008), From Negative to Positive Integration? European State Aid Control through Soft and Hard Law, (Max Planck Institute for the Study of Societies Discussion Paper 08/04, http://www.mpifg.de/pu/mpifg_dp/dp08-4.pdf (last accessed 2 June 2019), pp. 3 and 5.

  56. 56.

    See, inter alia, Articles 191 and 194(1)(d) TFEU; see also European Commission Communication on Energy 2020 – A Strategy for Competitive, Sustainable and Secure Energy, COM(2010) 639 final, 10 November 2010; and European Commission Communication on a Policy Framework for Climate and Energy in the period from 2020 to 2030, COM(2014) 15 final, 22 January 2014.

  57. 57.

    For more information: http://ec.europa.eu/competition/state_aid/modernisation/index_en.html (last accessed 2 June 2019).

  58. 58.

    Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in the application of Articles 107 and 108 TFEU, OJ [2014] L187/1 [hereinafter 2014 GBE Regulation]. This replaced: Commission Regulation (EC) No 800/2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty, OJ [2008] L214/3 [hereinafter 2008 GBE Regulation].

  59. 59.

    2014 GBE Regulation, Preamble, para 6.

  60. 60.

    European Commission Guidelines on State Aid for Environmental Protection and Energy 2014–2020, OJ [2014] C 200/1 [hereinafter 2014–2020 EEA Guidelines]. Formally speaking, these are not legally binding on the Member States, but are so for practical purposes since they guide the Commission’s assessment and decision-making on the compatibility of State aid with the internal market.

  61. 61.

    European Commission Memo – State Aid: Commission adopts new General Block Exemption Regulation’ (14/369), dated 21 May 2014 [hereinafter Commission Memo 2014], p. 2, estimating that “3/4 of today’s aid measures and about 2/3 of total aid amounts granted by Member States could be covered by the new GBE Regulation.”

  62. 62.

    2014 GBE Regulation, Articles 1(2)(c) and (d); similarly, 2008 GBE Regulation, Articles 2(a) and (b).

  63. 63.

    Usually referring to one-off aid measures covering upfront capital costs of investing in the production of energy from renewable energy sources (e.g., grants and preferential loans).

  64. 64.

    Defined as “renewable non-fossil energy sources”, namely wind, solar, aerothermal, geothermal, hydrothermal and ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases: 2014 GBE Regulation, Article 2 (110).

  65. 65.

    Usually referring to aid measures covering production-based costs of renewable energy generation (e.g., price-support instruments).

  66. 66.

    2014 GBE Regulation, Articles 41-43. Cf. 2008 GBE Regulation, Article 23, covering only investment aid for the promotion of energy from renewable energy sources.

  67. 67.

    E.g., on “transparent aid”: 2014 GBE Regulation, Article 5.

  68. 68.

    Ibid., Article 4(1)(s).

  69. 69.

    2008 GBE Regulation, Article 6(1)(b).

  70. 70.

    2014 GBE Regulation, Article 41(5).

  71. 71.

    2014 GBE Regulation, Article 41(6): these are the extra investment costs to promote the production of energy from renewable sources.

  72. 72.

    2014 GBE Regulation, Articles 41(7) and (8). These maximum aid intensities are roughly the same as those found under the former 2008 GBE Regulation, Article 23(2). However, under the 2014 GBE Regulation, these may go up to 100% of eligible costs, if the aid is granted in a competitive bidding process on the basis of clear, transparent and non-discriminatory criteria (Article 41(10)).

  73. 73.

    2014 GBE Regulation, Article 42(2). Nonetheless, under Articles 42(3) and (4), EU Member States may limit the bidding process to specific RE technologies under certain conditions (e.g., if necessary to achieve diversification or secure grid stability). In addition, under Article 42(8), a special exemption is made for small-scale installations producing electricity from renewables, whereby operation aid may be granted in the absence of a competitive tendering process but may not exceed €15 million per undertaking.

  74. 74.

    2014 GBE Regulation, Article 4(1)(v).

  75. 75.

    Commission Memo 2014, p. 1.

  76. 76.

    2014 GBE Regulation, Preamble, paras. 16 and 61.

  77. 77.

    2014 GBE Regulation, Chapter II.

  78. 78.

    European Commission State Aid Scoreboard 2016, http://ec.europa.eu/competition/state_aid/scoreboard/index_en.html (last accessed 2 June 2019). No specific data on renewable energy aid is available.

  79. 79.

    European Commission Community Guidelines on State Aid for Environmental Protection, OJ [2008] C 82/1 [hereinafter 2008 Guidelines].

  80. 80.

    2014–2020 EEA Guidelines, section 1.2.

  81. 81.

    Article 108(3) TFEU.

  82. 82.

    2014–2020 EEA Guidelines, section 1.1(15).

  83. 83.

    2014–2020 EEA Guidelines, section 6.

  84. 84.

    This test was first set out in: European Commission State Action Plan – Less and better targeted State aid: a road map for State aid reform 2005–2009, COM(2005) 107 final, 7 June 2005. It has been subsequently developed in the Commission’s guidelines: see e.g., 2008 Guidelines, section 1.3.

  85. 85.

    2014–2020 EEA Guidelines, section 3.2.1, whereby the planned State aid should be aimed at an objective of common interest in accordance with Article 107(3) TFEU (in this context, the shift towards a resource-efficient and low-carbon economy, and achieving a well-functioning, secure, affordable and sustainable European energy market).

  86. 86.

    2014–2020 EEA Guidelines, section 3.2.2, whereby the planned State aid targets a market failure and can bring about a material contribution towards achieving the specified environmental or energy objective that the market alone cannot deliver.

  87. 87.

    2014–2020 EEA Guidelines, section 3.2.3, whereby there are no less-trade distortive policy instruments or types of aid that would make an equivalent contribution to the sought environmental or energy objective.

  88. 88.

    2014–2020 EEA Guidelines, section 3.2.4, whereby the proposed State aid measure induces the beneficiary to change its behaviour to increase the level of environmental protection or to improve the functioning of a secure, affordable and sustainable energy market, and such a change in behaviour would not have occurred but for the aid.

  89. 89.

    2014–2020 EEA Guidelines, section 3.2.5, whereby the planned State aid is limited to the minimum necessary to achieve the environmental or energy objective aimed for.

  90. 90.

    2014–2020 EEA Guidelines, section 3.2.6, whereby the negative effects of the planned State aid measure in terms of distortions on competition and intra-EU trade must be limited and outweighed by the positive effects in terms of contribution to the sought environmental or energy objective, so that the overall balance is positive.

  91. 91.

    2014–2020 EEA Guidelines, sections 3.2.7 and 6.

  92. 92.

    See 2014–2020 EEA Guidelines, Annex I, laying down maximum aid intensities for RE investment aid that are similar to the ones previously seen under the GBE Regulation: 45%, 55% and 65% of eligible costs respectively for large, medium-sized and small enterprises, with the possibility of reaching 100% for aid provided following a competitive bidding process on the basis of clear, transparent and non-discriminatory criteria (section 3.2.5.1 (80)).

  93. 93.

    2014–2020 EEA Guidelines, section 3.3.2.1(124). In addition, beneficiaries are subject to standard balancing obligations and measures must be in place to ensure they have no incentive to generate electricity under negative prices.

  94. 94.

    European Commission Staff Working Document – Guidance for the Design of Renewable Support Schemes, SWD(2013) 439 final [hereinafter Commission WD 2013], pp. 8–9 and 12–13.

  95. 95.

    During a transitional phase covering the years 2015 and 2016, aid for at least 5% of the planned new green electricity capacity had to be provided through a competitive bidding process on the basis of clear, transparent and non-discriminatory criteria: 2014–2020 EEA Guidelines, section 3.2.5.1(126).

  96. 96.

    Ibid., section 3.2.5.1(126). Only under a limited number of circumstances are Member States still allowed to grant aid without such an allocation process (e.g., to avoid strategic bidding or underbidding).

  97. 97.

    Ibid., section 3.3.2.1(126), in which case, the Commission will presume that the aid is proportionate and does distort trade and competition to an extent contrary to the common interest. However, Member States may still carry out RE technology-specific tenders under certain conditions (e.g., if necessary to promote the long-term potential of a new and innovative technology or to achieve diversification or secure grid stability).

  98. 98.

    Ibid., section 3.3.1(121). In addition, the Guidelines promote cross-border cooperation with the Commission giving positive consideration to operating aid schemes for green electricity that are open to other EEA countries and Contracting Parties of the Energy Community: section 3.3.1(122).

  99. 99.

    Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources, OJ [2009] L140/16 [hereinafter 2009 Renewable Energy Directive], Article 3(3), leaving the choice of support instruments to the EU Member States in order to achieve their national renewable energy targets for 2020. For a discussion, see Marín Durán (2018), pp. 136–138; Callaerts (2015), pp. 17–18.

  100. 100.

    European Commission Proposal for a Directive of the European Parliament and of the Council, COM(2016) 767 final/2, 23 February 2017 [hereinafter 2016 Proposed RE Directive]. In particular, Article 4 provides that “[s]upport for electricity from renewable sources shall be designed so as to integrate electricity from renewable sources in the electricity market and ensure that renewable energy producers are responding to market price signals and maximise their market revenues” and that “Member States shall ensure that support for renewable electricity is granted in an open, transparent, competitive, non-discriminatory and cost-effective manner”.

  101. 101.

    Commission WD 2013, p. 4.

  102. 102.

    Commission Memo 2014, p. 2.

  103. 103.

    Commission WD 2013, p. 22.

  104. 104.

    Commission WD 2013, p. 7. Nevertheless, the Commission recognises that market integration may not be appropriate for small installations, which benefit from a differentiated regime under the 2014–2020 Guidelines (notably, no competitive bidding process is required and FITs and other equivalent forms of support are still allowed: 2014–2020 Guidelines, sections 3.2.2.2(131) and 3.3.2.1(125).

  105. 105.

    Horlick and Clarke (2017), p. 678.

  106. 106.

    Horlick and Clarke (2017), p. 676.

  107. 107.

    See Article 8.2 (c) ASCM, which deemed non-actionable those subsidies granting “assistance to promote adaptation of existing facilities to new environmental requirements imposed by law and/or regulations which result in greater constraints and financial burden on firms, provided that the assistance: (i) is a one-time non-recurring measure; and (ii) is limited to 20 per cent of the cost of adaptation; and (iii) does not cover the cost of replacing and operating the assisted investment, which must be fully borne by firms; and (iv) is directly linked to and proportionate to a firm’s planned reduction of nuisances and pollution, and does not cover any manufacturing cost savings which may be achieved; and (v) is available to all firms which can adopt the new equipment and/or production processes”.

  108. 108.

    For a thorough reconstruction of the negotiating history of Article 8 ASCM and the reasons for its expiration, see in particular Bigdeli (2011).

  109. 109.

    For a more in-depth discussion and contextualisation of this issue, see Espa and Marín Durán (2018), pp. 633–643.

  110. 110.

    A thorough explanation of how such distinctions play out for the purpose of assessing how different RE subsidies would fare under the ASCM is given in Espa and Marín Durán (2018), pp. 623–628.

  111. 111.

    See above, Sect. 2.

  112. 112.

    For a detailed explanation of how the so-called likeness of success argument conditions the choice of disputes, see de Bièvre et al. (2017).

  113. 113.

    In the India –Solar Cells dispute, the US withdrew the claim that the Indian feed-in tariff scheme at issue was inconsistent with Article 3 ASCM from its second request for consultations (intervened after the Appellate Body’s ruling in Canada – Renewable Energy (2013)), and decided to keep its claims under Article III:4 GATT and Article 2.1 TRIMs only. See WTO Appellate Body Report, India — Certain Measures Relating to Solar Cells and Solar Modules, adopted 14 October 2016, WT/DS456/AB/R [Appellate Body Report, India – Solar Cells (2016)]. For more details, see Asmelash (2015), pp. 277–278.

  114. 114.

    Appellate Body Report, Canada – Renewable Energy (2013); Appellate Body Report, India – Solar Cells (2016). It should however be noted that, in the former case, the Ontario government ended up removing its FIT scheme altogether for lack of political support otherwise. For more details, see Meyer (2017).

  115. 115.

    Especially in the short- to medium-run, the environmental benefits linked to the use of LCRs are highly disputed. See, among others, Casier and Moerenhout (2013), WTO Members, Not the Appellate Body, Need to Clarify the Boundaries in Renewable Energy Support, https://www.iisd.org/pdf/2013/wto_members_renewable_energy_support.pdf (last accessed 2 June 2019), pp. 1–2, 31–35 and 43–44.

  116. 116.

    For a more detailed explanation, see Espa and Marín Durán (2018), pp. 633–634.

  117. 117.

    Although trade in electricity has been expanding in latest years thanks to technological improvements and investment choices (see, e.g., Chatzivasileiadis and Ernst (2017), pp. 21–45), global imports of electricity only account for a negligible 3.5% of the world’s total final electricity consumption. See IEA Electricity Information: Overview (2017), https://www.iea.org/publications/freepublications/publication/ElectricityInformation2017Overview.pdf (last accessed 2 June 2019), pp. 5 and 7–8.

  118. 118.

    This happens in those countries where priority access and priority dispatch are also granted to green electricity, such as in the case of EU Members States until the reform of the Renewable Energy Directive will enter into force. For more details, see Espa (2017b), pp. 225–244.

  119. 119.

    See on this point, Advocate General Bot in the Case 573/12, Ålands Vindkraft, judgement of 1 July 2014 [ECLI:EU:C:2014:2037], paras. 75–76.

  120. 120.

    It should be noted, however, that based on existing WTO case law a “genuine and substantial relationship” between the FIT scheme itself and the current (or imminent) trade distortion must be shown as evidence of causation (that is, the effect of the scheme must be clearly disentangled from those of any other instruments supporting green electricity). For an analysis of the difficulties inherent to this exercise in the case of green electricity, see Espa and Marín Durán (2018), p. 638.

  121. 121.

    See Espa and Marín Durán (2018), pp. 637–639, for a detailed examination of all factors that are likely to exclude that a WTO dispute concerning a non-discriminatory FIT scheme actually materializes.

  122. 122.

    See, e.g., Cosbey and Mavroidis (2014), p. 28.

  123. 123.

    See, among others, IPCC Renewable Energy Sources and Climate Change Mitigation – Summary for Policy Makers and Technical Summary (2012), https://www.ipcc.ch/site/assets/uploads/2018/03/SRREN_Full_Report-1.pdf (last accessed 2 June 2019) p. 152. It should be noted, however, that countries are gradually phasing out costly out-of-market price-support mechanisms such as FIT programmes in favour of more sustainable, market-based mechanisms for setting premium prices such as competitive tendering. See, for all, IRENA (2017), Rethinking Energy 2017: Accelerating the Global Energy Transformation, http://www.irena.org/DocumentDownloads/Publications/IRENA_REthinking_Energy_2017.pdf (last accessed 2 June 2019), pp. 23–24.

  124. 124.

    An overview of such measures is given in Espa and Marín Durán (2018), pp. 623–628.

  125. 125.

    Espa and Marín Durán (2018), pp. 639–640.

  126. 126.

    UNEP (2014), Trade and Green Economy: Handbook, http://web.unep.org/sites/unep.org.greeneconomy/files/publications/Trade-GE-Handbook-FINAL-FULL-WEB.pdf (last accessed 2 June 2019), p. 105.

  127. 127.

    See, respectively, Articles 6.3 ASCM and 5(a). For more details, see Espa and Marín Durán (2018), pp. 640–641.

  128. 128.

    For a thorough analysis of the numerous CVD and antidumping investigations concerning green technology products, see Vermulst and Meng (2017), pp. 336–355.

  129. 129.

    See, among others, Espa and Marín Durán (2018), pp. 642–643; Horlick and Clarke (2017), p. 689.

  130. 130.

    Both proposals are examined at length in Espa and Marín Durán (2018), pp. 643–650.

  131. 131.

    See above, Sect. 2. For more details, see Marín Durán (2018), pp. 159–160.

  132. 132.

    See above, Sect. 2. For more details, Marín Durán (2018), p. 160.

  133. 133.

    See, e.g. Rubini (2012), p. 577; Rubini L (2015), Rethinking International Subsidies Disciplines: Rationale and Possible Avenues for Reform, http://e15initiative.org/publications/rethinking-international-subsidies-disciplines-rationale-and-possible-avenues-for-reform (last accessed 2 June 2019), pp. 4–5.

  134. 134.

    See further Marín Durán (2018), p. 160.

  135. 135.

    See Bigdeli (2011), p. 20.

  136. 136.

    Bigdeli (2011), pp. 20 and 36. For a discussion on how the European Commission’s powers are uniquely distinct, see Marín Durán (2018), p. 161.

  137. 137.

    Among the more structured proposals, see Shadikhodjaev (2015), pp. 494–496; Horlick and Clarke (2017), p. 680. For a more detailed account, see Espa and Marin Duran (2018), pp. 649–650.

  138. 138.

    Espa and Marin Duran (2018), p. 650.

  139. 139.

    See Marín Durán (2018), p. 161.

  140. 140.

    See, e.g. Rubini (2012), pp. 561–566; Howse (2013), Securing Policy Space for Clean Energy under the SCM Agreement: Alternative Approaches, http://e15initiative.org/wp-content/uploads/2015/09/E15-CETs-Howse-Final.pdf (last accessed 6 February 2018), p. 2; Shadikhodjaev (2015), pp. 499–505; and, more recently, Condon (2017), pp. 685–690.

  141. 141.

    The direction indicated by the Appellate Body in recent WTO case law, however, seems hardly open to such an interpretation. In particular, the Appellate Body has clarified that GATT Article XX defences can be available to violations of non-GATT provisions only to the extent that such provisions incorporate specific language to that effect (that is, in the form of an “objective” textual link). See WTO Appellate Body Report, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/DS395/DS398/AB/R, adopted 22 February 2012, paras. 303–306; and WTO Appellate Body Report, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS431/DS432/DS433/AB/R, adopted 29 August 2014, paras. 5.63–5.65 and 5.74. For more details, see Espa (2015), pp. 194–202.

  142. 142.

    As it is known, Articles XX(b) and (g) GATT respectively justify measures “necessary to protect human, animal and plant life or health” and “related to the conservation of exhaustible natural resources”. Pursuant to the introductory paragraph of Article XX GATT, any such measure cannot be “applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade”.

  143. 143.

    See Marín Durán (2018), pp. 161–162; Espa and Marín Durán (2018), pp. 645–646.

  144. 144.

    See Marín Durán (2018), pp 161–162; Espa and Marín Durán (2018), p. 646.

  145. 145.

    See above, Sect. 2.

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Acknowledgements

We are very grateful to Rike Krämer and all the participants in the workshop on “EU and WTO Approaches towards Trade and Environment” (Ruhr Universität, Bochum on 9-10 May 2016) for the rich exchanges on the topic. All opinions and any errors remain our own. This Article further develops the findings and arguments presented in Espa and Marín Durán (2018), Espa (2017a) and Marín Durán (2018).

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  1. Università della Svizzera Italiana, Lugano, Switzerland

    Ilaria Espa

  2. World Trade Institute, Bern, Switzerland

    Ilaria Espa

  3. University College London, London, UK

    Gracia Marín Durán

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  1. Ilaria Espa
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  1. Ruhr-University Bochum, Bochum, Germany

    Rike Krämer-Hoppe

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Espa, I., Marín Durán, G. (2020). EU and WTO Regulatory Approaches to Renewable Energy Subsidies: Negative and Positive Integration. In: Krämer-Hoppe, R. (eds) Positive Integration - EU and WTO Approaches Towards the "Trade and" Debate. European Yearbook of International Economic Law(). Springer, Cham. https://doi.org/10.1007/978-3-030-25662-3_4

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