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Canada | Brussels, 19 December 2012

EU welcomes WTO report on Ontario’s Energy programme

The EU today welcomes the WTO Dispute Settlement Panel’s conclusions that a programme introducing restrictive conditions in relation to Ontario’s renewable energy sector is inconsistent with Canada’s obligations under the WTO. The EU supports the promotion of renewable energy but considers this must be done in a manner consistent with international trade rules.

In 2009 the Canadian province of Ontario established a Feed-in-tariff programme that foresees payments for renewable energy at an above market price. Feed-in-tariff programmes are used in a large number of countries with a view to increasing the share of electricity from renewable sources in overall electricity generation, taking into account the generally higher costs involved in producing renewable energy. However, in order to benefit from this programme, the Ontario authorities set conditions that favour domestic products and services, known as "domestic content requirements". Under such requirements, wind and solar electricity generators must use an increasing percentage of equipment sourced in Ontario in order to benefit from a feed-in-tariff contract: for solar power generators, the domestic content threshold is set at 60%, and for on-shore wind power generators the threshold is 50%.

Those conditions create an artificial incentive to rely on domestic goods and are detrimental to EU manufacturers that export the relevant equipment to Canadian customers.

The EU initially sought a negotiated solution, but in the absence of progress in the consultations with the Canadian authorities the EU took a case under the WTO's Dispute Settlement procedures in order to obtain the re-establishment of WTO compatibility and fair conditions for EU industry on the Canadian market. Japan brought a similar WTO challenge against Ontario's protectionist requirements.

The WTO Dispute Settlement Panel found, in both cases from Japan and the EU, that the programme is inconsistent with WTO rules, namely the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade Related Investment Measures (TRIMs). In particular, the Panel held that the Ontario's domestic content rules require electricity generators to rely on domestic goods if they wish to benefit from Ontario's feed-in-tariff programme, and this places imports at a disadvantage.

Exports from the EU into Canada in wind power and photovoltaic power generation equipment are significant, ranging from €300 to 600 million in 2007-2009. These figures could be higher should the local content requirements be removed from the legislation in question.

Next steps

The parties concerned have the possibility to appeal the panel’s ruling within 60 days.

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