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Renewable Energy, Subsidies, and the WTO: Where Has the ‘Green’ Gone?

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  • Bougette, Patrice
  • Charlier, Christophe

Abstract

Faced with the energy transition imperative, governments have to decide about public policy to promote renewable electrical energy production and to protect domestic power generation equipment industries. For example, the Canada – Renewable energy dispute is over Feed-in tariff (FIT) programs in Ontario that have a local content requirement (LCR). The EU and Japan claimed that FIT programs constitutesubsidies that go against the SCM Agreement, and that the LCR is incompatible with the non-discrimination principle of the World Trade Organization (WTO). This paper investigates this issue using an international quality differentiated duopoly model in which power generation equipment producers compete on price. FIT programs including those with a LCR are compared for their impacts on trade, profits, amount of renewable electricity produced, and welfare. When ‘quantities’ are taken into account, the results confirm discrimination. However, introducing a difference in the quality of the power generation equipment produced on both sides of the border provides more mitigated results. Finally, the results enable discussion of the question of whether environmental protection can be put forward as a reason for subsidizing renewable energy producers in light of the SCM Agreement.

Suggested Citation

  • Bougette, Patrice & Charlier, Christophe, "undated". "Renewable Energy, Subsidies, and the WTO: Where Has the ‘Green’ Gone?," Climate Change and Sustainable Development 187843, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:187843
    DOI: 10.22004/ag.econ.187843
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    2. Ogura, Yasuhiro, 2020. "Policy as a “porter” of RE component export or import? Evidence from PV/wind energy in OECD and BRICS," Energy Economics, Elsevier, vol. 86(C).
    3. Cheng, Y.S. & Tsang, K.P. & Woo, C.K., 2025. "Protectionism's adverse impact on renewable energy deployment: evidence from the European Union's import duties on China-made photovoltaic panels," Energy Policy, Elsevier, vol. 206(C).
    4. Sovacool, Benjamin K., 2017. "Reviewing, Reforming, and Rethinking Global Energy Subsidies: Towards a Political Economy Research Agenda," Ecological Economics, Elsevier, vol. 135(C), pages 150-163.
    5. Patrice Bougette & Christophe Charlier, 2018. "Antidumping and Feed-In Tariffs as Good Buddies? Modeling the EU-China Solar Panel Dispute," The Energy Journal, , vol. 39(6), pages 171-188, November.
    6. Patrice Bougette & Christophe Charlier, 2019. "Subsidies and Countervailing Measures in the EU Biofuel Industry: A Welfare Analysis," Post-Print halshs-02306022, HAL.
    7. Stefan Bößner & Francis X. Johnson & Zoha Shawoo, 2020. "Governing the Bioeconomy: What Role for International Institutions?," Sustainability, MDPI, vol. 13(1), pages 1-24, December.
    8. Agnieszka Hajdukiewicz & Bożena Pera, 2020. "International Trade Disputes over Renewable Energy—the Case of the Solar Photovoltaic Sector," Energies, MDPI, vol. 13(2), pages 1-23, January.
    9. Zhang, M.M. & Zhou, D.Q. & Zhou, P. & Chen, H.T., 2017. "Optimal design of subsidy to stimulate renewable energy investments: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 873-883.

    More about this item

    Keywords

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    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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