Are Feed-In Tariff Schemes with Local Content Requirements Consistent with WTO Law?

This article provides an overview of how WTO law applies to renewable energy feed-in tariffs (FITs) with local content requirements (LCR). It concludes that FITs with LCR are inconsistent with specific WTO provisions in the GATT and the TRIMs Agreement and that both agreements would therefore prohibit the use of such schemes. From the Appellate Body decision in the Canada-Renewable Energy case, uncertainty remains over whether FITs with LCR would constitute “prohibited subsidies” under the SCM Agreement. The Appellate Body was unable to complete the analysis needed to establish whether FITs “confer a benefit” and can therefore be considered as a “subsidy”. The analysis suggests that there are no provisions in current WTO law that could exempt FITs with LCR from WTO discipline. Although there might be an option to invoke provisions from outside of the WTO realm to justify the violations of WTO rules through FITs with LCR, there are as yet no provisions that could have sufficient force. The benefit of an energy agreement within the WTO is discussed. Finally, the need for a debate on the revision of the “infant industries” exception and the inclusion of new subsidy exceptions in the SCM Agreement is stressed.