WTO Pulls Up Canada for Local Sourcing Rule in Power Generation

A WTO panel has sided with the EU and Japan in their challenge of renewable energy support provided by the Canadian province of Ontario, the global trade arbiter announced earlier today. Brussels and Tokyo had argued that the feed-in-tariff (FIT) system - put in place in 2009 - violates WTO rules because it requires participating electricity generators to source up to 60 percent of their equipment in Ontario.

The case (DS412 and DS426) has been widely portrayed as an environmental dispute, dealing with the extent to which government authorities can favour domestic producers and suppliers in promoting green energy. At panel hearings earlier this year, however, the arguments from the parties principally focused on the investment aspects of the FIT provisions.

The report now confirms the view that the scheme’s “local content requirement” violates the WTO’s non-discrimination principle enshrined in the General Agreement on Tariffs and Trade (GATT) and the WTO Agreement on Trade-Related Investment Measures (TRIMS). The panellists further demand that Canada brings its measures into conformity. Unless appealed, this would in effect mean that the FIT programme itself may stay in place in its current form, but that the local content requirement must be withdrawn.

Such a “discriminatory measure,” said Japan in its statement before the panel in March this year, “is designed to promote the production of renewable energy generation equipment in Ontario rather than to promote the generation of renewable energy.”