Energy Subsidies & Trade

For decades, the trajectories of fossil fuel subsidies and world trade have been closely interwoven.

Geneva, Switzerland—29 April 2013—The World Trade Organization (WTO) and the Energy Charter organized a workshop to discuss how WTO regulation and the Energy Charter Treaty (ECT) apply to trade and investment in energy.

Japan recently announced that consultations had failed to resolve its dispute with Canada over the Province of Ontario’s feed-in-tariffs for renewable energy, and that in mid-June it will be asking the WTO to establish a dispute settlement panel. This is awful news for the multilateral trade system, for which the dispute will be corrosive, seemingly pitting trade against the environment.

In the past two months, the U.S. Congress has decided to continue paying Brazilian cotton farmers US$ 147 million a year; speculation intensifies as the United States enters into consultations with China over subsidies for wind energy; and the American Soybean Association makes noises about the potential trade impacts of the European Union’s Renewable Energy Directive.

In the past two months, Japan has accused Canadian province Ontario of breaking WTO rules in its support for renewable energy; and the United States has launched an investigation into Chinese support for green industries more generally. Find out why in the WTO Subsidy Dispute Round-up.

Energy subsidies are a long-debated issue as regards their efficacy, efficiency and relationship with the problem of climate change. These questions have been recently included on the agenda of the G-20, after the Leaders’ Summit held in Pittsburgh in September 2009. Paragraphs 29 and 31 of the Leaders’ Statement set forth a course of action for member countries. In those paragraphs, fossil-fuel subsidies are questioned on the grounds that they can be inefficient and encourage wasteful consumption, and it is therefore proposed to phase them out over the medium-term, while recognizing the importance of providing those in need with essential energy services.

This September, the International Food and Agriculture Trade Policy Council (IPC) released a report about biofuel subsidies and international trade, Biofuel and Biomass Subsidies in the U.S., EU and Brazil: Towards a Transparent System of Notification.