Sustainable Development vs. Free Trade: Council of Canadians joins environmental, labour and civil society groups in defending Ontario's Green Energy Act from WTO challenge

This morning, environmental, civil society and labour organizations sent a joint amicus curiae (friend of the court) submission to the WTO supporting Canada's defence of the Ontario Green Energy Act. The landmark 2009 renewable energy and climate change policy is being attacked at the WTO by Japan and the European Union, with backup from the United States, who all claim that it involves illegal (under WTO rules) subsidies to local producers of wind and solar equipment and services. The first hearing into the case, which pits climate change and trade liberalization obligations against each other, took place in Geneva in March 2012. There's a second hearing tomorrow and Wednesday where rebuttals will be heard.

Japan and the EU say they see nothing wrong with Ontario's goal of reducing greenhouse gas emissions by increasing renewable energy production and shutting down coal-fired plants. But they take offense to domestic content requirements that wind and solar power suppliers must meet in order to qualify for feed-in-tariff rates set by the Province. The EU is also pressuring Ontario to remove domestic content quotas from the Green Energy Act and other provincial contracts through the Comprehensive Economic and Trade Agreement (CETA) negotiations with Canada. The WTO challenge is likely a way to add pressure to Ontario and other Canadian provinces to fully commit hydro and transit agencies, as well as their municipalities, to rigid procurement rules forbidding the use of public spending as a local development tool.

In other words, Japan and the EU oppose the idea of sustainable development, which says that environmental protection can and should be combined with economic development and job creation objectives as the Green Energy Act was designed to do. If they win their case at the WTO, there will be implications for sustainable development policies globally, which is why this dispute is garnering global attention.

The Canadian groups involved in the amicus curiae submission -- Blue Green Canada, the Canadian Auto Workers, the Canadian Federation of Students, the Canadian Union of Public Employees, Communications, Energy and Paperworkers union of Canada, the Council of Canadians and the Ontario Public Service Employees Union -- 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.

Our joint submission to the WTO was prepared by Steven Shrybman, trade and public interest lawyer with Sack Goldblatt Mitchell LLP, and member of the board of the Council of Canadians. Some of the main arguments we make include:

- The obligation to reduce greenhouse gas emissions cannot, under international law, be relegated to secondary status to the goals of trade liberalization. To the contrary, by signing and ratifying the Framework Convention on Climate Change and the Kyoto Protocol, Canada, the EU and Japan have each declared that the pursuit of ecological security in the face of potentially catastrophic climate change is the paramount obligation.

- The WTO has recognized that climate change "is not a problem that can afford to wait." But that "It is a threat to future development, peace and prosperity that must be tackled with the greatest sense of urgency by the entire community of nations." This Japan/EU-Canada dispute is an important test of whether WTO rules will show the flexibility required to address climate change as Director General Pascal Lamy suggests they should.

- Even though the current Canadian government has taken steps to repudiate its Kyoto commitments, and is the only country to do so, Ontario's Green Energy Act was adopted while Canada's climate obligations were outstanding, and they are mandated by the Framework Convention to which Canada is still a signatory.

- Article 3 of the Framework Convention requires that Canada, or in this case Ontario, is required to integrate environmental and economic policies and goals, which is exactly what it has done in the Green Energy Act and precisely the definition of "sustainable development."

- On the specific argument that feed-in-tariffs are an illegal subsidy, our opinion confirms Canada's view that payments by the Ontario government to renewable energy producers are in fact a type of government procurement and therefore exempt from restrictions in the Subsidies and Countervailing Measures Agreement.

- Canada also correctly points out that the domestic content requirements in the Green Energy Act are completely in line with the General Agreement on Tariffs and Trade as per Article III: 8(a), which exempts "the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale."

- Article 3 of the Kyoto Protocol requires each of the Parties (Canada, the EU and Japan included) to implement policies and measures including those established for the, "Enhancement of energy efficiency in relevant sectors of the national economy," and for, "Progressive reduction or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all greenhouse gas emitting sectors that run counter to the objective of the Convention and application of market instruments." Meeting these requirements were integral to Ontario's decision to phase out coal generation.

- The EU's claim that the domestic content requirements in the Act are unnecessary for the purpose of promoting renewable power fails on several grounds. First, because there is no "necessity test" in GATT Article III:8(a) - in other words the exemption for procurement for a government purpose says nothing about that purpose being "necessary." Second, Japan's and the EU's claim that governments cannot use procurement to promote economic development renders the exemption described above meaningless. Adopting the EU's interpretation here would open up all government offsets (local development conditions on public spending) to challenge regardless of any limited protections member states have taken in the WTO's Government Procurement Agreement. Finally, the EU and Japan are trying to create a dichotomy between environmental protection and economic development which is at odds with the definition of sustainable development, which both countries claim to support.

- Canada's decision to pull out of the Kyoto Accord could explain why it does not raise climate obligations in its defence of the Green Energy Act. Instead, Canada seems all too willing to use WTO, NAFTA and other trade rules to undermine fuel quality standards and other climate measures in the United States and the EU.

- The WTO should recognize its limitations to decide in this case and accede to the jurisdiction and competence of multilateral institutions and instruments that have been created to address the imperative of climate change. In the event of a conflict between trade liberalization rules and obligations under the Framework Convention and Kyoto Accord, under international treaty law, priority must be given to the latter.

- Following the second hearing into the case on May 15 and 16, the WTO dispute panel is expected to make a decision as early as October 2012. We are committed to defending the Green Energy Act from this and other trade challenges over the coming months and will be updating the website with campaign material and new information as we receive it.

To read the amicus curiae submission, our media release from today, and for links to resources on the Green Energy Act, the WTO dispute and links with the CETA negotiations, click here.