The EU Questions RES policy in Ontario, Canada, before the WTO

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.

References:

- Case documents as filed at the WTO and summary page on the same dispute;

- The EU requests WTO consultations with Canada over Ontario's renewable energy policy, press release, European Commission, 11.08.2011.

Safety of Shale Gas in the US: Draft Report to the DOE Made Available (preliminary note)

The needs to regulate shale gas exploration and exploitation, as well as hydraulic fracturing are subject to discussion all around the globe these days. Some countries have prohibited the practice, like in France in May 2011, others see shale gas as a real answer to energy dependency, like in Poland or the US (see in the case of the US, the wider initiative "Blueprint for a Secure Energy Future").

The US is about to re-discuss the issue, following the publication of a draft report on 11 August 2011 by the Natural Gas Subcommittee of the Secretary of Energy Advisory Board (SEAB) - Safety of Shale Gas Development (website here). The draft report is part of a mission attributed in May 2011 to the subcommitte of the SEAB and which purpose is to come forward with"recommendations to improve the safety and environmental performance of natural gas hydraulic fracturing from shale formations - harnessing a vital domestic energy resource while ensuring the safety of our drinking water and the health of the environment" (press release of 05.05.2011 here). Based on the results of the report, the Subcommittee shall "develop, within 6 months, consensus recommended advice to the agencies on practices for shale extraction ..." (see Blueprint document).

The content of the draft report will be summarised shortly on this blog. It is inter alia based on the results from a series of meeting and hearings held in June and July (available here). The initial report of the Subcommittee is expected to be published on 18 August 2011, and the final report on 18 November 2011. The minority group of the U.S. Senate Committee on Environment & Public Works has already commented the report pointing out the "increased regulatory" needs suggested by "Washington" in the report (press release here).

References: Press release of the US Department of Energy summarising the draft report, 11.08.2011.