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WTO ruling hampers renewable energy plan in India

ISDS Report

A World Trade Organization (WTO) state-state dispute settlement panel has struck down the Indian government’s local content requirement for its solar power programme. India is seeking to add 100,000MW of solar power by 2022. India had sought the local content requirement for the estimated 10,000MW of solar power it would provide a subsidy to create.

Livemint reports, “The US raised the dispute over the Indian government’s imposition of local content requirements for solar cells and solar modules. The government has offered financial support of up to Rs.1 crore per megawatt (MW) to the implementing agency for setting up large solar capacities by placing orders with domestic manufacturers. WTO members are not supposed to insist on national content requirements that discriminate against foreign products. Governments are also required to provide ‘national’ treatment, under which imports must be treated on a par with domestically manufactured products.”

In her book This Changes Everything, Naomi Klein writes about a similar ruling in Ontario. She notes, “I discovered that one of the key, precedent-setting cases pitting ‘free trade’ against climate action was playing out in Ontario – my own backyard. …[In 2009], the province had unveiled its climate action plan, the Green Energy and Green Economy Act, centred on a bold pledge to wean Canada’s most populous province completely off coal by 2014. …The legislation created what is known as a feed-in tariff program, which allowed renewable energy providers to sell power back to the grid, offering long-term contracts with guaranteed premium prices. The catch was that in order for energy providers to qualify, they had to ensure that a minimum percentage – 40 to 60 per cent – of their workforces and materials were local to Ontario.”

She highlights, “The core of the program was an undeniable success. By 2012, Ontario was the largest solar producer in Canada and by 2013, it had only one working coal-fired power plant left. And by 2014, more than 31,000 jobs had been created. …[But] Japan and then the European Union let it be known that they considered Ontario’s local content requirement to be a violation of World Trade Organization rules. The WTO ruled against Canada, determining that Ontario’s buy-local provisions were indeed illegal. And the province wasted little time in nixing the local-content rules that had been so central to its program.”

Klein comments, “From a climate perspective, the WTO ruling was an outrage: If we want to keep warming below catastrophic levels, wealthy economies like Canada must make getting off fossil fuels their top priority. How absurd, then, for the WTO to interfere with that success – to let trade trump the planet itself. And yet from a strictly legal standpoint, Japan and the EU were perfectly correct. One of the key provisions in almost all free trade agreements involves something called ‘national treatment’, which requires governments to make no distinction between goods produced by local companies and goods produced by foreign firms outside their borders. Worse, it’s not only critical supports for renewable energy that are at risk of these attacks. Any attempt by a government to regulate the sale or extraction of particularly dirty kinds of fossil fuels is also vulnerable to similar trade challenges.”

And she concludes, “Trade challenges aren’t killing renewable energy, but the growth is not happening fast enough. And the legal uncertainty that now surrounds some of the most significant green energy programs in the world is bogging us down at the very moment when science is telling us we need to leap ahead. To allow arcane trade law, which has been negotiated with scant public scrutiny, to have this kind of power over an issue so critical to humanity’s future is a special kind of madness. …The errors of this period [when deals like NAFTA were signed] cannot be undone, but it is not too late for a new kind of climate movement to take up the fight against so-called free trade and build this needed architecture now. …[We need] a far more thoughtful and deliberate approach to why we trade and whom it serves.”

One way to do that is being championed by Council of Canadians chairperson Maude Barlow. She wants to see a provision included in the agreement expected to be reached at the United Nations COP 21 climate summit in Paris this December that would protect governmental measures that would reduce greenhouse gas emissions from investor-state dispute settlement (ISDS) challenges. Barlow writes, “There is a problem that needs to be addressed if any agreement or treaty reached at the Paris summit is to be realized in the home countries of the parties. The central problem is that many of the same countries pledging to take serious action on climate change are also party to, or are aggressively negotiating, trade and investment deals that contain a mechanism that gives large corporations the right to challenge any changes to the current rules under which they operate.”

Barlow will be in Paris for the climate summit (which starts Nov. 30) to advocate for this provision. Barlow adds, “It is our hope that this report [An ISDS Carve-Out to Support Action on Climate Change by Gus Van Harten] will get widely published and impact the negotiations in Paris. We also hope that the climate and trade justice communities will adopt the demand that the threat of ISDS must be part of any meaningful discussions in Paris.” You can assist in this by helping to spread word of this report via e-mail, Facebook, Twitter and conversation.

The Council of Canadians has also signed the Leap Manifesto which states, “We call for an end to all trade deals that interfere with our attempts to rebuild local economies, regulate corporations and stop damaging extractive projects.” To join with the thousands who have already signed the manifesto, please click here.

Further reading
Barlow calls for protection from ISDS challenges in Paris climate agreement (Oct. 2, 2015 blog)
NAFTA panel could rule on investor-state challenge [on wind power] this month (Oct. 17, 2015 blog)