Ontario’s Feed-in Tariff: Will the WTO Trump Climate Imperatives?

By Public Citizen's Global Trade Watch

Download the PDF

Ontario’s feed-in tariff (FIT) program, which incentivizes investment in and production of renewable energy, has come under fire at the World Trade Organization (WTO). The program has enjoyed success and acclaim in incentivizing the production of clean energy and the creation of green jobs – both key elements of tackling the climate crisis. However, in November 2012, a WTO panel ruled that the “buy local” components of the program violate WTO rules in the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Investment Measures (TRIMs) and should be “brought[]…into conformity” (i.e. eliminated).In a May 2013 final ruling, the Appellate Body of the WTO upheld the decision that the FIT program violates the GATT and the TRIMs. Canada now faces the threat of WTO-authorized trade sanctions if Ontario does not bring its acclaimed program into compliance with WTO rules, which could mean watering down or striking the program’s critical buy-local provisions.

At stake in this case is the extent to which governments can provide incentives for renewable energy production and green job creation. The ability of governments to adopt domestic content rules favoring local producers and suppliers is critical to these goals, and the broader goal of tackling climate change. The transition to a clean energy economy depends on a robust local supply of green goods, services and jobs to cultivate a domestic renewable energy industry that can challenge the power of the fossil fuel industry in the setting of national climate policies. Additionally, tying together green jobs and climate policy has the benefit of making climate change solutions politically feasible in sometimes-hostile political environments. And, by helping to develop localized renewable energy industries, domestic content rules help bring more renewable energy producers to the global market, driving down the cost of renewable energy technologies and encouraging competition and innovation in the medium and long-term.

Indeed, one of the main arguments of Japan and the EU, which launched the WTO case against Canada’s FIT program, is that without the buy-local provisions, Ontario’s market would not be able to sustain any domestic renewable electricity generators. While they presented this fact as evidence of a violation of WTO rules, Canada explained that indeed the FIT’s very purpose “was to encourage the construction of new renewable energy generation facilities that would not have otherwise existed.” The buy-local components of Ontario’s feed-in tariff program are fundamental to combating the climate crisis and must remain intact.