Canadian Clean Energy Initiative Under Attack

In a deeply troubling decision reported this week, the World Trade Organization (WTO) has issued a confidential ruling against Ontario’s successful “feed-in tariff” incentives program that is designed to reduce carbon pollution and create clean energy jobs. Despite the fact that climate change is reaching catastrophic tipping points—evidenced in part by hurricane Sandy—the WTO has shot down an innovative program that doesn’t just serve to mitigate climate change, but creates new jobs at the same time.

To fairly evaluate the WTO’s decision, let’s consider Ontario’s initiative. Established in 2009, the initiative sparks investment in and production of renewable energy by guaranteeing that the Ontario Power Authority, a public utility, buys electricity from wind and solar producers at a competitive rate that will help the local clean energy producers thrive and support new clean energy jobs right in Ontario.

To combat the climate crisis and transition to a clean energy economy, we must start producing and manufacturing goods—including renewable energy—locally.  This process of “relocalizing” production reduces carbon pollution associated with shipping goods overseas and supports the creation of new local green jobs.  The government of Ontario recognizes this and requires that participating developers source a certain percentage of project equipment and production—up to 50 percent for wind-power projects over 10kW and up to 60 percent for micro-solar-PV projects—from Ontario.

The program is still quite new but has already achieved significant success. It has helped create over 20,000 jobs and has led to contracts for more than 4,600 megawatts worth of clean energy.

Sadly, instead of trying to mimic this innovative program, some countries are trying to kill it before it can even reach its full potential. In 2011, Japan and the European Union launched cases against Ontario’s program at the WTO, claiming that the requirement for developers to source locally is illegal under WTO rules. The United States then piled on a third-party brief asserting that the “buy-Ontario” requirement violates WTO rules.

Canada countered that WTO rules allow them to give preference to local products when a government agency (read: Ontario Power Authority) procures products (read: renewable energy) for governmental purposes. The WTO panel, however, took a narrow view of trade law and ruled that the buy-local component of the program is illegal. Canada will now have to decide whether to comply with the ruling, which may mean stripping the buy-local requirements, or to appeal the decision.

This dangerous ruling undermines the ability of local citizens and local governments all over the world to act to fight climate change and create clean energy jobs. If Canada appeals and is not successful, it will mean that local governments across Canada, the U.S., and beyond will have a harder time providing local incentives for renewable energy production and local job creation.

The ruling has even broader implications for poor countries. Particularly during the early stages of a country’s development, it is critical that governments have the tools needed to nurture and grow domestic industries—including renewable energy—in order to cultivate a manufacturing base. History shows that governments need a range of policy options, including incentives to promote and support local industries as they become internationally competitive.  This WTO ruling is another attempt to chip away at these critically important tools to develop and leapfrog dirty energy.

Given the dire impacts of the climate crisis that even the WTO has acknowledged, it is imperative that citizens and local and national governments have the ability to develop clean energy economies. Ontario’s initiative strives to accomplish the inseparable goals of combating climate change and transitioning to a clean energy economy—a commendable effort worthy of duplication all over the globe.  The World Trade Organization should stand with these efforts – not stand in the way.

--Ilana Solomon, Sierra Club Trade Representative