ASCM disciplines and recent WTO case law developments : what space for 'green' subsidies ?

Abstract

This paper highlights that the question of policy space with respect to public support to electricity cannot be answered by clinically isolating legal rules from their factual background – constituted of technological innovations, market developments and the broader political economy. Various stylized scenarios in the green economy are briefly assessed to determine the impact subsidy rules may have. A more general assessment of the SCM Agreement leads to the conclusion that WTO subsidy laws are uncertain and - inasmuch as they may not be fully in line with best green policy prescriptions - unsound. In the face of a prospect of more frictions and litigation, legal security must be positively reinstated. The case-law may contribute to clarify some issues but the more fundamental decisions determining what is, and what is not, legitimate are beyond its purview and competence. For this reason, the recent Appellate Body decision in the Canada – Renewable Energy/ FIT disputes, with its construction of the benefit analysis, is essentially wrong. The paper concludes by arguing that the only real option for a clear and legitimate recognition of green policy space resides with law reform. In this regard, acknowledging that reform is not only an outcome but first of all a process preparing for a negotiated outcome, various suggestions for the way forward are outlined.