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“Reverse Permissibility” in the Renewable Energy Sector: Going Beyond the US-India Solar Cells Dispute

Published online by Cambridge University Press:  06 December 2016

Umair Hafeez GHORI
Umair Hafeez GHORI*
Affiliation:
Bond University, Australiaughori@bond.edu.au
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Abstract

Recent years have witnessed a rise in conflict between WTO members over the use of state subsidies designed to promote the renewable energy sector. Government subsidies are seen by domestic polic-ymakers as a key catalyst in attracting foreign investment, building capacity, and meeting other domestic policy goals. However, subsidies and other state incentivization programmes often carry trade-distorting effects. This paper examines the current state of WTO law and jurisprudence on subsidies extended to achieve environmental goals, in particular the Canada-Renewable Energy/Feed-in Tariff case and the more recent India-Solar Cells case which higlights the localization problem in the renewable energy sector. The case outcome shows that the WTO continues to maintain the status quo by prioritizing free trade over environmental considerations. The paper also discusses the possibility of reform in the GATT/WTO framework for promotion of renewable energy initiatives while maintaining the integrity of the system.

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Articles
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Asian Journal of International Law , Volume 8 , Issue 2 , July 2018 , pp. 322 - 349
Copyright
© Asian Journal of International Law 2016 

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Footnotes

*

LLB (Hons), LLM, PhD. Assistant Professor, Faculty of Law, Bond University. Member, Transnational, International, Comparative Law and Policy [TICLP] Network. I am grateful to Tonya Roberts, who provided invaluable and prompt research assistance. The usual disclaimers apply.

References

1. WTO Panel Report, India-Certain Measures Relating to Solar Cells and Solar Modules, 24 February 2016, WTO Doc. WT/DS456/R [India-Solar Cells].

2. See e.g. D. KANTH, Ravi, MISHRA, Asit Ranjan, and BHASKAR, Utpal, “WTO Rules Against India in Solar Panels Dispute with the US” LiveMint (27 August 2015)Google Scholar, online: LiveMint <http://www.livemint.com/Politics/11yE8Bz6bgZZ6LhXXlB8eL/WTO-panel-rules-against-India-in-solar-dispute.html>; Charles PIERSON, “How the US and the WTO Crushed India’s Subsidies for Solar Energy” Counterpunch (28 August 2015), online: Counterpunch <http://www.counterpunch.org/2015/08/28/how-the-us-and-the-wto-crushed-indias-subsidies-for-solar-energy/>; Rajesh ROY, “WTO Panel Rules Against India’s Solar Program” The Wall Street Journal (1 September 2015), online: The Wall Street Journal <http://www.wsj.com/articles/wto-panel-rules-against-indias-solar-program-1441112645>.

3. See generally WTO, “Notification of an Appeal by India Under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and Under Rule 20(1) of the Working Procedures for Appellate Review”, India-Certain Measures Relating to Solar Cells and Solar Modules, 20 April 2016, WTO Doc. WT/DS456/9; “India Loses Solar Case Against US at WTO; to Appeal” NDTV (28 August 2015), online: NDTV <http://www.ndtv.com/india-news/india-loses-solar-case-against-us-at-wto-to-appeal-1211764>; and Michael CRUICKSHANK, “India Loses WTO Case on Solar Panels Suppliers” The Manufacturer (1 September 2015), online: The Manufacturer <http://www.themanufacturer.com/articles/india-loses-wto-case-on-solar-panels-suppliers/>.

4. See generally Government of India, Ministry of New and Renewable Energy, “Scheme/Documents”, online: Ministry of New and Renewable Energy <http://www.mnre.gov.in/solar-mission/jnnsm/introduction-2/>.

5. See NTPC, “NTPC Overview”, online: NTPC <http://www.ntpc.co.in/en/about-us/ntpc-overview>; and Solar Energy Corporation of India, “Introduction”, online: SECI <http://www.seci.gov.in/content/innerpage/introduction.php>.

6. WTO Panel Report, supra note 1 at paras. 7.4–5; and EU, “Third Party Written Submission by the European Union”, India-Certain Measures Relating to Solar Cells and Solar Modules, 19 December 2014, WTO Doc. WT/DS456, at paras. 7–8.

7. WTO Panel Report, Ibid.; and EU, “Third Party Written Submission by the European Union”, Ibid.

8. See USTR, “First Written Submission of the United States”, India-Certain Measures Relating to Solar Cells and Solar Modules, WTO Doc WT/DS456 (24 October 2014), at paras. 26–8.

9. The US, for example, cited s. 2.5D of the Draft Guidelines for Phase II (Batch 2) of the JNNSM entitled as “Domestic Content Requirement”. The relevant provision reads: “Under the DC, the solar cells and modules used in the solar PV power plants must both be made in India” (ibid., at paras. 26–8, 32). In the earlier Phase I (Batch 1) Guidelines, the US highlighted s. 2.5D, which explicitly stated that “in case of Solar PV Projects to be selected in the first batch during FY 2010–11, it will be mandatory for Projects based on crystalline silicon technology to use the modules manufactured in India” (ibid., at para. 30).

10. See USTR, supra note 8 at para. 33.

11. See e.g. the discussion in Pierson, supra note 2.

12. See generally Government of India, Ministry of New and Renewable Energy, supra note 4.

13. The WTO records Brazil, Ecuador, Canada, China, Chinese Taipei, the EU, Japan, Korea, Malaysia, Norway, Russia, Saudi Arabia, and Turkey as countries which have reserved their third-party rights. See WTO, “dispute settlement-the disputes-DS456”, online: WTO <https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds456_e.htm>.

14. WTO, “Request to Join Consultations-Communication from Japan”, India-Certain Measures Relating to Solar Cells and Solar Modules, 25 February 2014, WTO Doc WT/DS456/4.

15. Ibid.

16. See e.g. comments in Ishita DAS, “Switching off the Sun? The India-US Solar Cells Dispute” Oval Observer Foundation (19 January 2015), online: Oval Observer Foundation <http://ovalobserver.org/switching-off-sun-india-us-solar-cells-dispute/>.

17. See e.g. WTO Appellate Body Report, Canada-Measures Affecting the Renewable Energy Generation Sector, 6 May 2013, WTO Doc. WT/DS412/AB/R [Canada-Renewable Energy]; and Canada-Measures Relating to the Feed-in Tariff Program, 6 May 2013, WTO Doc. WT/DS426/AB/R [Canada-Feed-in Tariff] at paras. 5.170, 5.174, cited in PAL, Rajib, “Has the Appellate Body’s Decision in Canada-Renewable Energy/Feed-in Tariff Program Opened the Door for Production Subsidies?” (2014) 17 Journal of International Economic Law 125 at 128CrossRefGoogle Scholar.

18. WTO Appellate Body Report, supra note 17 at para. 5.175.

19. See e.g. STOKES, Leah, “The Politics of Renewable Energy Policies: The Case of Feed-in Tariffs in Ontario, Canada” (2013) 56 Energy Policy 490 at 495CrossRefGoogle Scholar.

20. See e.g. USTR, “Second Written Submission of the United States”, India-Certain Measures Relating to Solar Cells and Solar Modules, 11 March 2015, WTO Doc. WT/DS456 at paras. 18–23, 28–32.

21. See WTO Panel Report, Canada-Measures Affecting the Renewable Energy Generation Sector, 19 December 2012, WTO Doc. WT/DS412/R [Canada-Renewable Energy]; and Canada-Measures Relating to the Feed-in Tariff Program, 19 December 2012, WTO Doc. WT/DS426/R [Canada-Feed-in Tariff] at paras. 3.1, 3.4.

22. See WTO Panel Report, Ibid.; and Canada-Measures Relating to the Feed-in Tariff Program, Ibid.

23. Ibid., at paras. 3.2(a), 3.5(a).

24. WTO Appellate Body Report, supra note 17 at para. 5.85.

25. WTO Panel Report, supra note 21 at para. 7.107.

26. Ibid.

27. Ibid., at para. 7.118.

28. Ibid., at para. 7.152.

29. Ibid., at para. 7.167.

30. Ibid., at para. 7.127.

31. Ibid.

32. WTO Appellate Body Report, supra note 17 at para. 5.78.

33. Ibid., at para. 5.79.

34. Ibid.

35. Ibid., at para. 5.63.

36. See generally WTO Appellate Body Report, Canada-Measures Affecting the Export of Civilian Aircraft, 2 August 1999, WTO Doc. WT/DS70/AB/R [Canada-Aircraft].

37. WTO Appellate Body Report, supra note 17 at para. 5.119.

38. Ibid.

39. Ibid., at para. 5.128.

40. Ibid.

41. Ibid., at paras. 5.246, 6.1(b)(i). In doing so, the Appellate Body reversed the panel’s finding, in paras. 7.328(ii), 8.7 of the EU Panel Report (see WTO Appellate Body Report, supra note 17 at para. 6.1(b)(i)).

42. Ibid., at para. 5.175.

43. Ibid., at para. 5.188.

44. Ibid.

45. Ibid.

46. Ibid., at para. 5.224.

47. Ibid.

48. See e.g. discussion of the investment and transaction cost cycle with reference to wind energy sector in developing countries in GHORI, Umair, “Risky Winds: Investing in Wind Energy Projects in Pakistan” (2012) 30(2) Journal of Energy & Natural Resources Law 129 at 153–156CrossRefGoogle Scholar; see also the discussion in Pal, supra note 17 at 128–31; and Stokes, supra note 19 at 495.

49. See WTO Panel Report, supra note 1 at para. 7.39; see also USTR, “Second Opening Statement of the United States”, India-Certain Measures Relating to Solar Cells and Solar Modules, 28 April 2015, WTO Doc. WT/DS456 at paras. 2, 4; and USTR, supra note 8 at paras. 26–33.

50. USTR, ibid at para. 4; see also USTR, supra note 8 at paras. 31–3.

51. See WTO Panel Report, supra note 1 at paras. 7.50–1; see also WTO, “Request for Consultations by the United States”, India-Certain Measures Relating to Solar Cells and Solar Modules, 11 February 2013, WTO Doc. WT/DS456/1 at 2.

52. See WTO Panel Report, supra note 1 at paras. 7.42, 7.44; see also India’s response to Panel Question No. 2(b) referred to by USTR, supra note 20 at para. 8.

53. See USTR, supra note 20 at para. 8.

54. See WTO, supra note 1 at ftn. 219.

55. Ibid., at para. 7.45.

56. Ibid.

57. Ibid.

58. Ibid.

59. Ibid., at ftns. 145, 146.

60. Ibid., at para. 7.46.

61. Ibid.

62. Ibid., at para. 7.47.

63. Ibid., at para. 7.47, citing Appellate Body’s arguments in Canada-Renewable Energy/Feed-in Tariff case (see WTO Appellate Body Report, supra note 17 at paras. 5.24, 4.103).

64. Ibid., at para. 7.51.

65. Ibid.

66. Ibid.

67. Ibid., at para. 7.52.

68. Ibid.

69. Ibid., at para. 7.54.

70. Ibid., at paras. 7.55–73.

71. Ibid., at paras. 7.74–99.

72. Ibid., at para. 7.54 (see ftn. 168).

73. Ibid., at para. 7.101.

74. See WTO Panel Report, supra note 1 at paras. 7.101, 7.108, 7.109–10, 7.114; see also India’s First Written Submission, para. 114 referred to by USTR, supra note 20 at para. 14; and USTR, supra note 20 at para. 16.

75. See WTO Panel Report, supra note 1 at para. 7.154; and WTO Appellate Body Report, supra note 17 at paras. 5.76–8.

76. See WTO Panel Report, supra note 1 at paras. 7.142, 7.165; and WTO Appellate Body Report, supra note 17, at paras. 5.76, 5.79.

77. See WTO Panel Report, supra note 1 at paras. 7.109, 7.124, 7.127 (see in particular, ftn. 320).

78. See WTO Panel Report, supra note 1 at paras. 7.109, 7.114; and India’s response to Panel Question No. 19, paras. 2–3, referred to by USTR, supra note 20 at paras. 17–18, 28–9.

79. See WTO Panel Report, supra note 1 at para. 7.117; and WTO Appellate Body Report, supra note 17 at para. 5.63, quoted in USTR, supra note 20 at para. 18.

80. See WTO Panel Report, supra note 1 at para. 7.117.

81. Ibid, at para. 7.121; and USTR, supra note 20 at paras. 17–20.

82. See USTR, supra note 20 at para. 20.

83. See WTO Panel Report, supra note 1 at para. 7.114; and India’s First Written Submission, para. 112, referred to by USTR, supra note 20 at para. 23.

84. See WTO Panel Report, supra note 1 at para. 7.114.

85. Ibid.

86. USTR, supra note 20 at paras. 22, 28.

87. Ibid., at para. 21.

88. Ibid.

89. See WTO Panel Report, supra note 1 at para. 7.131; and EU, supra note 6 at para. 38.

90. See WTO Panel Report, supra note 1 at para. 7.122; and USTR, supra note 20 at para. 32.

91. WTO Panel Report, supra note 1 at para. 7.128.

92. Ibid., at para. 7.127.

93. Ibid., at para. 7.129.

94. Ibid., at para. 7.145.

95. Ibid., at para. 7.153.

96. Ibid.

97. Ibid., at para. 7.155.

98. Ibid., at para. 7.156.

99. Ibid., at para. 7.157.

100. Ibid., at para. 7.161.

101. Ibid., at para. 7.164.

102. WTO Appellate Body Report, Korea-Measures Affecting Imports of Fresh, Chilled and Frozen Beef, 31 July 2000, WTO Doc. WT/DS161/AB/R.

103. WTO Appellate Body Report, Mexico-Tax Measures on Soft Drinks and Other Beverages, 6 March 2006, WTO Doc. WT/DS308/AB/R.

104. WTO Appellate Body Report , supra note 102 at para. 157.

105. WTO Appellate Body Report , supra note 103 at paras. 69, 79.

106. See WTO Panel Report, supra note 1 at paras. 7.268–76; and paras. 240, 255, 260 of India’s First Written Submission referred to by USTR, supra note 20 at para. 51.

107. See WTO Panel Report, supra note 1 at paras. 7.294–7.

108. Ibid., at para. 7.286; and USTR, supra note 20 at para. 50.

109. See WTO Panel Report , ibid., at para. 7.304; and USTR, ibid.

110. USTR, ibid., at para. 52.

111. USTR, supra note 49 at paras. 40–1.

112. USTR, supra note 20 at para. 54.

113. EU, supra note 6 at para. 67; and WTO, supra note 3 at para. 7.305.

114. GATT Panel Report, EEC-Regulation on Imports of Parts and Components, 16 May 1990, GATT Doc. No. BISD 37S/132 [EEC-Parts and Components] at para. 5.17, cited by USTR, supra note 20 at para. 54; see also USTR, supra note 49 at para. 41.

115. WTO Panel Report, Colombia-Indicative Prices and Restrictions on Ports of Entry, 27 April 2009, WTO Doc. WT/DS366/R at para. 7.538, cited by EU, supra note 6 at para. 67.

116. WTO Panel Report, US-Measure Relating to Shrimp from Thailand, 29 February 2008, WTO Doc. WT/DS343/R at para. 7.188, cited by USTR, supra note 49 at para. 42.

117. USTR, supra note 49 at para. 44.

118. USTR, supra note 20 at paras. 73–5.

119. WTO Panel Report, supra note 1 at para. 7.298.

120. Ibid.

121. Ibid., at para. 7.299.

122. Ibid., at paras. 7.299–300.

123. Ibid., at para. 7.301.

124. Ibid., at paras. 7.310, 7.330–2.

125. Ibid., at para. 7.311.

126. Ibid., at paras. 7.318, 7.322.

127. Ibid., at paras. 7.332–3.

128. Ibid., at para. 7.189; see also India’s First Written Submission at para. 209, referred to by the EU, supra note 6 at para. 47.

129. See WTO Panel Report, supra note 1 at para. 7.231; see also India’s First Written Submission at paras. 209–12, referred to by the EU, supra note 6 at para. 47.

130. See WTO Panel Report, supra note 1 at para. 7.231; see also India’s First Written Submission at paras. 221–2, referred to by the EU, supra note 6 at para. 48.

131. See WTO Panel Report , supra note 1 at para. 7.239; see also India’s Second Written Submission at para. 62, referred to by USTR, supra note 49 at para. 34.

132. WTO Appellate Body Report, China-Measures related to the Exportation of Various Raw Materials, 30 January 2012, WTO Doc. No. WT/DS395/AB/R [China-Raw Materials] at para. 325, cited by USTR, supra note 20 at para. 36; see also WTO, supra note 3 at paras. 7.203–4.

133. See WTO Panel Report, supra note 1 at para. 7.221; see also USTR, supra note 20 at para. 36.

134. See WTO Panel Report, supra note 1 at para. 7.221; see also USTR, supra note 20 at para. 36.

135. See reference to India’s First Written Submission at paras. 233, 236, referred to by USTR, supra note 20 at para. 37.

136. EU, supra note 6 at para. 51.

137. WTO Appellate Body Report, supra note 132 at para. 326, cited by USTR, supra note 20 at para. 38.

138. USTR, supra note 20 at para. 38.

139. Ibid.

140. USTR, supra note 49 at para. 35.

141. Ibid., at para. 37; and USTR, supra note 20 at para. 43.

142. See WTO Panel Report, supra note 1 at paras. 7.264–5.

143. Ibid., at paras. 7.207, 7.224–5, 7.234.

144. Ibid., at para. 7.224.

145. Ibid., at para. 7.226.

146. Ibid.

147. Ibid., at paras. 7.237, 7.243, 7.248–50.

148. Ibid., at paras. 7.255–57.

149. Ibid., at para. 7.257.

150. Ibid., at para. 7.260.

151. Ibid., at para. 7.262.

152. Ibid., at paras. 7.264–5.

153. See generally for e.g., CHANG, Ha-Joon, Kicking Away the Ladder: Development Strategy in a Historical Perspective, 1st ed (London: Anthem Press, 2002)Google Scholar.

154. See Panel Report, supra note 1 at para. 7.17.

155. Summarized in para. 7.17 of the Panel Report; see also WTO Panel Report, supra note 1 at para. 7.19.

156. COSBEY, Aaron, “Renewable Energy Subsidies and the WTO: The Wrong Law and the Wrong Venue” Global Subsidies Initiative (19 June 2011), online: International Institute for Sustainable Development <https://www.iisd.org/gsi/news/renewable-energy-subsidies-and-wto-wrong-law-and-wrong-venue>>Google Scholar at 3.

157. See WTO Panel Report, supra note 1 at para. 7.45.

158. Ibid.

159. Ibid.

160. Ibid., at para. 7.46.

161. Pal, supra note 17 at 128; see also Stokes, supra note 19 at 495, and discussion in Part III.

162. ICTSD, “US Proclaims Victory in Wind Power Case; China Ends Challenged Subsidies” Bridges (8 June 2011), online: ICTSD <http://www.ictsd.org/bridges-news/bridges/news/us-proclaims-victory-in-wind-power-case-china-ends-challenged-subsidies>; see also, Ghori, supra note 48 at 132–3; GHORI, Umair, “An Epic Mess: ‘Exhaustible Natural Resources’ and the Future of Export Restraints after the China-Rare Earths Decision” (2015) 16 Melbourne Journal of International Law 398 at 418–420Google Scholar.

163. World Wind Energy Association, “The World Sets New Wind Installations Record: 63,7 GW New Capacity In 2015” (10 February 2016), online: WWEA <http://www.wwindea.org/the-world-sets-new-wind-installations-record-637-gw-new-capacity-in-2015/>.

164. For a detailed analysis of the China-Rare Earths decision and its effects on export restraints, see Ghori, supra note 161 at 425.

165. MARTIN, Richard, “China is on an Epic Solar Power Binge” MIT Technology Review (22 March 2016)Google Scholar, online: MIT Technology Review <https://www.technologyreview.com/s/601093/china-is-on-an-epic-solar-power-binge/>.

166. SHEN, Feifei, “China’s Solar Prices Could Fall 38 Percent by 2020, Become Competitive With Coal” Bloomberg (23 May 2016)Google Scholar, online: Bloomberg <http://www.bloomberg.com/news/articles/2016-05-23/china-s-solar-prices-can-fall-38-become-competitive-with-coal>.

167. Cosbey, supra note 155 at 3.

168. Ibid.

169. Ibid.

170. See discussion in the preceding part of this paper.

171. WTO Panel Report, supra note 1 at para. 7.156.

172. Ibid.