The European Union (EU) has announced on 11 August 2011 that it has requested WTO consultations with Canada concerning the RES policy of Ontario, one of the Canadian provinces, that the EU deems to be contrary to international tade rules. Japan had previously initiated a WTO dispute settlement procedure on the same legislation on 13 September 2010, followed by the establishment of a panel on 20 July 2011. On the American continent, a power company located in Texas, Mesa Power, has challenged the same measure under the rules of the North American Free Trade Agreement (NAFTA) (see text of the Notice of Intent before NAFTA here).
The EU argues that Ontario's RES policy provides subsidies to producers of renewable energy but make the support conditional to the use of domestic technology. The Ontario's legislation at stake is the Ontario Green Energy and Economy Act (OGEA). In its press release, the EU Commission describes the legislation as such:
"The OGEA empowers the Ontario Power Authority (OPA) to develop programmes to encourage the use of renewable energy. Under this regime, the OPA has developed a feed-in-tariff (FIT) programme that allows it to buy renewable energy at an above market price. This is a subsidy. In order to benefit from this incentive programme, the OPA has set conditions that favour domestic products and services [materials or labour]. As an example, for solar energy 40-50% of the initial costs to develop a project must be made of up products or services from Ontario, rising to 60% for projects developed after 2011; for wind energy these rates amount to 25% for the initial costs, rising to 50% for projects developed after 2012."
The EU is also concerned by the measure due to the large volume of exports to Canada in the sector of wind power and photovoltaic electricity generation equipments (EUR 300-600 million in 2007-2009, as reported by the Commission). It expects the exports to be even higher should the Ontario's measure be removed. The request is, consequently, directly motivated by commercial purposes in Canada but also in other countries that would adopt similar measures in order to protect their national RES industry.
In its complaint before the WTO, Japan argued that the Ontario's legislation: provides less favourable treatment to imported RES equipment that the like products from Ontario, and are in infringement with Article III.4 GATT; represents a quantitative regulation in favour of domestic suppliers, contrary to Article III.5 GATT; seems to constitute a trade-related investment measure contrary to Article III, refering to Article 2.1 of the Agreement on Trade-Related Investment Measures; and violates Article 3.1(b) and 3.2 of the Agrement on Subsidies and Countervailing Measures, by making access to the FIT conditional upon the use of domestic goods or services.
- The EU requests WTO consultations with Canada over Ontario's renewable energy policy, press release, European Commission, 11.08.2011.