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Renewable Energy, Subsidies, and the WTO: Where has the 'Green' Gone?

Author

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  • Patrice Bougette

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

  • Christophe Charlier

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

Abstract

Faced with the energy transition imperative, governments have to decide about public policies to promote renewable electrical energy production and to protect domestic power generation equipment industries. These policies can generate trade frictions. For example, in the Canadian renewable energy dispute the EU and Japan claimed that Feed in Tariff (FIT) programs in Ontario constitute discriminatory subsidies because of a local content requirement (LCR) clause that is incompatible with World Trade Organization obligations. 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 sales 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 has a moderating effect on the results. Finally, the results enable discussion of the question of whether environmental protection can be a reason for subsidizing renewable energy producers in light of the SCM Agreement.

Suggested Citation

  • Patrice Bougette & Christophe Charlier, 2014. "Renewable Energy, Subsidies, and the WTO: Where has the 'Green' Gone?," GREDEG Working Papers 2014-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis, revised Aug 2015.
  • Handle: RePEc:gre:wpaper:2014-20
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    Cited by:

    1. Patrice Bougette & Christophe Charlier, 2017. "Antidumping and Feed-In Tariffs as Good Buddies? Modeling the EU-China Solar Panel Dispute," Working Papers halshs-01818315, HAL.
    2. 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.
    3. 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

    Feed-in tariffs; Subsidies; Local content requirement; Industrial policy; Canada - Renewable energy dispute; Trade policy;

    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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