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Canada, EU, Japan make first arguments in appeal of WTO decision against Green Energy Act

Ontario Premier Kathleen Wynne with outgoing leader Dalton McGuinty: Green and gas power will continue to haunt Liberal government in 2013 (Photo: Frank Gunn/The Canadian Press)

Ontario Premier Kathleen Wynne with outgoing leader Dalton McGuinty: Green (and not just gas) power will continue to haunt Liberal government in 2013 (Photo: Frank Gunn/The Canadian Press)

The Canadian government is disputing a World Trade Organization decision in December that declared local content requirements in Ontario’s Green Energy Act illegal under WTO non-discrimination rules. According to a February 18 report of the International Centre for Trade and and Sustainable Development (ICTSD), Canada is “insisting that the programme qualifies for an exemption from certain trade rules relating to government procurement under the General Agreement on Tariffs and Trade (GATT).”

It looks as if the only thing in the way of an exemption is the WTO’s opinion that power purchased in Ontario by the government (via Crown agencies) is put back into the grid “with a view to commercial resale.” As ICTSD explains, the WTO felt that publicly purchased power was “sold on the market in competition with private-sector retailers of electricity. This effectively means Canada is not purchasing electricity solely for government purposes, even if Ontario is not profiting directly from the resale of the electricity.”

Canada insists that there can be no commercial resale of electricity since there is no stable electricity market in Ontario. Instead, like most hybrid (public-private, with a little too much of the latter) power systems, the province relies on subsidies and regulations. ICTSD reports that “Canada also insists that electricity purchased through the FIT (feed-in-tariff) programme is not resold because it is directly injected by way of renewable energy generators into the grid and pooled with other sources of electricity.”

Even though the EU and Japan convinced the WTO panel that the FIT programme in the Green Energy Act discriminates against foreign wind and solar firms, they are pushing the limits of WTO law in their appeals. According to ICTSD, the EU “contends that the government procurement exception should never apply to the TRIMs (Trade-Related Investment Measures) Agreement, and that regardless of whether the programme qualifies as government procurement, Canada is responsible for bringing the programme into alignment with the TRIMs Agreement by eliminating the local content requirement.”

The implications of that statement are huge. If the WTO’s Appellate Body were to agree with the EU, then even where a country has excluded some government agencies (ex. power and transit bodies, municipal governments, etc) from its WTO procurement commitments, a country could still be found to violate the TRIMs Agreement whenever domestic content or hiring quotas are employed as a sustainable development tool.

The Appellate Body will take a few months to decide whether to uphold or alter the earlier panel report declaring the Green Energy Act’s feed-in-tariff programme illegal. The Canadian and Ontario governments would then have to decide whether to keep or scrap the important local content requirements in the GEA, in which case Canada would face countervailing sanctions in Japan and the EU.

The Council of Canadians is one of several groups who jointly sent an amicus curiae (friend of the court) submission to the WTO in defence of the Green Energy Act. Despite its flaws, including an over-emphasis on private power, we believe strongly that Ontario is right to use public spending on electricity to try to develop green infrastructure and green jobs. We believe it is the right of all countries to use procurement in creative ways to address the multiple crises facing our world — from climate change to food insecurity to financial instability.

To read more about the WTO case and our submission, click here.