Feed-in Tariffs for Renewable Energy and the WTO Agreement on Subsidies and Countervaling Measures. Are Feed-in Tariffs Specific Subsidies?

Abstract

In attempts to address climate change many states have introduced subsidy programmes in order to increase the use of renewable energy. Among such subsidy programmes Feed-in Tariffs (FITs) are among the most common and most successful. However, with the increase in the use of such subsidisation programmes there has been a significant rise in disputes in the WTO questioning whether such measures, including FITs, are compatible with WTO law, particularly with the Agreement on Subsidies and Countervailing Measures (SCM Agreement). Therefore, this dissertation aims to clarify the WTO law on subsidies in the SCM Agreement with respect to FIT programmes in order to assess WTO member states’ possibilities to maintain such measures in place. Using a model FIT based on common characteristics of FIT programmes, it is assessed whether FIT programmes fulfil the requirements to constitute a specific subsidy in the SCM Agreement or whether such measures are not considered specific subsidies and thus fall outside of the scope of the SCM Agreement. It is concluded that, due largely to how the Appellate Body in recent case law has defined the relevant market, it will be possible for states to design FIT programmes so that they will not be considered to confer a benefit and thus do not fulfil the requirements in the definition of a subsidy in the SCM Agreement and consequently fall outside of the scope of the SCM Agreement. It is, however, also concluded that there is still a need for states to be mindful of the tariff level when designing FIT programmes in order for such programmes not to fall within the scope of the SCM Agreement. Lastly, the implications of the recent case law for the subsidy regime are also discussed.