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The EU and the WTO | Brussels, 6 May 2013

Ontario’s Energy programme: EU welcomes WTO ruling in support of clean energy

The European Commission today welcomes the World Trade Organisation (WTO) Appellate Body’s ruling which confirms the EU’s claim that the discriminatory conditions in the support scheme for wind and solar power introduced by the Canadian Province of Ontario are in breach of WTO rules.

Ontario requires electricity generating companies to source equipment domestically, as a condition for benefitting from long-term guaranteed prices for the energy they produce. The EU is a significant producer and exporter of wind and photovoltaic power but its exports to Canada could be much higher should the measure promoting use of domestic equipment be removed. By restricting imports, the measure taken by Ontario increases the cost of electricity generation and has a negative impact on the deployment of affordable clean energy solutions.

The EU challenged Ontario’s measure at the WTO in August 2011 in order to ensure the respect of WTO rules and the re-establishment of fair competition for EU products on the Canadian market. Japan brought a similar WTO challenge against Canada. On 19 December 2012, a WTO Dispute Settlement Panel concluded that Ontario's programme discriminated against imports and was inconsistent with WTO rules. Canada appealed the Panel report on 5 February 2013. The WTO Appellate Body has today dismissed Canada’s appeal and confirmed that Ontario’s discriminatory rules are in breach of the WTO Agreement.

“Today’s ruling is good news for everyone caring about clean energy and the environment: it has been made clear that use of quality, cost-effective technologies should not be hampered by protectionist measures”, said John Clancy, EU Trade Spokesman. ”The EU supports the promotion of renewable energy but considers this must be done in a manner consistent with international trade rules.”
 

What exactly is the problem?

The Canadian province of Ontario established its “feed-in-tariff” programme in 2009. It foresees paying above market rates for electricity from renewable sources in order to compensate for higher generation costs and to increase the share of clean energy in the local electricity market. Many countries use similar incentives that are lawful as long as the country remains open to all modern technological solutions, both domestic and foreign.

Ontario, however, set conditions that favour domestic products and services: wind and solar electricity generators must use a certain percentage of equipment sourced in Ontario in order to obtain contracts under the “feed-in-tariff programme”. The domestic content threshold is set at 60% for solar power generators and for 50% for on-shore wind power generators. Such conditions create an artificial incentive to rely on domestic goods and are detrimental to EU manufacturers that export the relevant equipment to Ontario customers. In addition, the limited competition raises the cost of electricity from wind and solar power increasing the electricity prices for Ontario households and businesses, and hampering the transition toward environmentally-friendly technologies.

 

Next steps

Under WTO rules, the Appellate Body report will be adopted by the WTO Dispute Settlement Body within 30 days. Canada should then present during the following month its plan for implementing the ruling.

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