A SETA presents an attractive solution to coordinate national policies with the aim of lowering the cost of renewable energy policies.78
Negotiating a SETA would provide an excellent way to address renewable energy concerns in a trade-friendly manner. To avoid the curse and cost of permanent protection, countries might agree within a SETA a non-renewable time limit, say of 10 years,for their existing LCRs. To allow for an orderly transition and avoid litigation, signatories to a SETA could agree on a ‘peace clause’, so that they would not risk being taken to the WTO Dispute Settlement Body for existing LCRs during this agreed phase-out period.
Governments might also consider agreement on a moratorium or standstill on the adoption of future LCRs within a SETA. This was done by the Group of Twenty (G20) with respect to trade protectionist measures during the economic recession of 2008-2010. To backstop such commitments, concerned countries might call upon the WTO Secretariat, through its Committee on Trade and Environment, to launch a surveillance programme of LCRs in the renewable energy space. The programme would report on instances of adoption of LCRs and, where possible, assess their effectiveness. Reaching such an agreement in a SETA would reduce the risk for repeated trade disputes at the WTO and provide more clarity and certainty for business as well.
Under a SETA, countries might agree to include their partners in a ‘regional content requirement’ (RCR)rather than using LCRs, at least for scheduled projects during the agreed phase-out period in the renewable space.
For example, the scheduled RCRs might
refer to certain wind turbine components.
This effective ‘cumulation’ of the LCR within the region constituted by the members to the SETA would effectively dilute the restrictive impact of the measure. Although an RCR might create some trade diversion, it would be less than that created by LCRs imposed purely at the national level. This trade diversion would have to be weighed against the environmental objectives.
Bearing in mind the scholarly literature on LCR effectiveness, countries might agree within a SETA to cap their LCR percentages at a moderate level, appropriate for the sector in question.Such a cap could be either maintained throughout the agreed phase-out period or could be agreed as a permanent deviation from existing rules. The former would likely be a more easily acceptable option. This limit might be best negotiated in the context of a SETA, against other trade-offs in the environmental area. Although such a cap could also be carried out unilaterally, the SETA would provide a vehicle to specifically address the cost-benefit analysis of the recourse to LCRs in order to best evaluate how well such measures work in practice to meet the shared objective of moving toward a ‘greener economy’ in light of their trade-distorting effects.
Moving forward with negotiating a SETA could serve to facilitate alternative or innovative approaches to liberalizing sustainable energy goods and services. It could provide a framework conducive to assessing the linkages between sustainable energy goods and energy services, and serve as a useful
‘laboratory,’ where rules and disciplines pertaining to sustainable energy could be clarified and take shape.
1. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
2. Kuntze, Jan-Christoph and Tom Moerenhout. Forthcoming. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper
4. Monkelbaan, Joachim. December 2011. “Trade Preferences for Environmentally Friendly Goods and Services.” ICTSD Working Paper. Page 25.
5. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper. Page 4.
6. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper. Page 5.
7. Ibid
8. In particular, the paper by Gary Clyde Hufbauer, Jeffrey Schott, Martin Vieiro and Erika Wada,
“Local Content Requirements: Report on a Global Problem”, Peterson Institute for International Economics, forthcoming summer 2013
9. Hufbauer, Gary Clyde et al. 2013. “Local Content Requirements: A Global Problem.” Peterson Institute for International Economics, forthcoming 2013.
10. Hufbauer, Gary Clyde, Jeffrey J. Schott and Woan Fong Wong, ”Figuring out the Doha Round”, Peterson Institute for International Economics, June 2010, p. 108.>>The estimates in this volume are considered to be conservative and have been superceded by new research on the payoff from greater trade facilitation. A recent World Economic Forum – World Bank report entitled Enabling Trade: Valuing Growth Opportunities, (2013), shows even larger estimates for payoff from a dramatic (but) feasible reduction in trade transactions costs, of 5% of global GDP and 15% gain in global trade, when these costs are brought down halfway to the level of the world’s best practice.
11. Straits Times, “WTO cuts 2013 trade growth forecast to 3.3%”, April 11, 2013. P. A24.
12. This estimate is based on an examination of Appendix A in Hufbauer, op cit.
13. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
14. Moon, Gillian. “Capturing the Benefits of Trade? Local Content Requirements in WTO Law and the Human Rights-Based Approach to Development.” 2009. Page 13.
15. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
16. Farrell, John. “Maximizing jobs from clean energy.” The New Rules Project. 2011. Page 28.
17. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
18. Lewis, Joanna and Ryan Wiser. “Fostering a Renewable Energy Technology Industry.” Environmental Technologies Division, Ernesto Orlando Lawrence Berkeley National Laboratory. 2005.
Endnotes
Endnotes 19. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable
Energy Industry – A good match?” ICTSD Issues Paper.
20. Kuntze, Jan-Christoph and Tom Moerenhout. Forthcoming. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper. Page 5.
21. Ibid.
22. Ibid.
23. “Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement.”
November 2011. ICTSD Issues Paper. Page 41.
24. Tomsik, Vladimir and Jan Kubicek. 2006. “Can local content requirements in international investment agreements be justified?” NCCR. Page 18.
25. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper; and Moon, Gillian. 2009. “Capturing the Benefits of Trade? Local Content Requirements in WTO Law and the Human Rights-Based Approach to Development.” Page 13.
26. It may also be true, however, that if no LCRs had been put in place, there may not have been any renewable energy production at all, so the two objectives – economic efficiency and environmental sustainability – must once again be evaluated together.
27. Jie-A-Joen, Clive, Rene Belderbos and Leo Sleuwaegen. “Local content requirements, vertical cooperation, and foreign direct investment.” Faculty of Economics and Business Administration, Maastricht Univeristy. 1998. Page 34.
28. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
29. Ibid.
30. Ibid.
31. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
32. Monkelbaan, Joachim, “Services in a Sustainable Energy Trade Agreement”, ICTSD, forthcoming 2013.
33. Brewer, Thomas and Andreas Falke. 2012. “International Transfers of Climate-Friendly Technologies: How the World Trade System Matters.” Low Carbon Technology Transfer: from Rhetoric to Reality. By David Ockwell and Alexandra Mallet. Routledge.
34. Lewis, J., and Wiser, R. 2005. “Fostering a Renewable Energy Technology Industry.” Ernesto Orlando Lawrence Berkeley National Laboratory, Environmental Energy Technologies Division.
35. “Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement.”
November 2011. ICTSD Issues Paper. Page 40.
36. Kuntze, Jan-Christoph and Tom Moerenhout. Forthcoming. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper. Page 8.
37. Veloso, F. 2001. Local content requirements and industrial development: Economic analysis and cost modeling of the automotive supply chain. Massachusetts Institute of Technology, Engineering Systems Division.
38. “Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement.”
November 2011. ICTSD Issues Paper. Page 41.
39. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
40. Veloso, F. 2001. Local content requirements and industrial development: Economic analysis and cost modeling of the automotive supply chain. Massachusetts Institute of Technology, Engineering Systems Division.
41. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper.
42. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for International Economics. Page 44.
43. Veloso, F. 2001. Local content requirements and industrial development: Economic analysis and cost modeling of the automotive supply chain. Massachusetts Institute of Technology, Engineering Systems Division.
43. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for Internatinal Economics. Windvision 2025 Powering Canada’s Future. Available at: http://www.canwea.ca/windvision_e.php
44. Wilke, Marie. 2011. “Feed-in Tariffs for Renewable Energy and WTO Subsidy Rules.” International Center for Trade and Sustainable Development. Page 5.
45. Ontario Power Authority. 2010. “Feed-in Tariff Program FIT Rules Version 2.0.” Available at:
http://fit.powerauthority.on.ca/august-10-2012-final-fit-20-program-documents-posted
46. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper. Page 17.
47. Hao, May et al. 2010. “Local content requirements in British Columbia’s Wind Power Industry.”
Faculty of Business – Pacific Institute for Climate Solutions. University of Victoria. Page 26.
48. Marion Fraser, Fraser & Company. 2009. “Developing Ontario’s Green Energy and Green Economy Act to its Full Potential.” Fraser & Company. Page 20.
49. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for International Economics.
50. Wilke, Maria. 2011. “Feed-in Tariffs for Renewable Energy and WTO Subsidy Rules.” International Center for Trade and Sustainable Development. Page vii.
51. The report of the Appellate Body supported the panel’s conclusions that local content requirements accord preferential treatment to products made in Ontario by requiring the purchase or use of products from domestic sources, which is prohibited in the illustrative list of the TRIMS Agreement, and therefore places Canada in breach of its national treatment obligation under GATT Article III and TRIMS Agreement Article II. The WTO appellate judges also rejected Canada’s
Endnotes rebuttal that the local content requirements should be considered as government procurement
which can be exempted from the national treatment obligation,” the findings continued, referring to one of the main arguments that Ottawa had made in its case. See Bridges Weekly Trade News Digest •Volume 17 • Number 16 • 8th May 2013 and earlier, Bridges Weekly, 19 December 2012 and 20 February 2013
52. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for International Economics. Page 48.
53. Hao, May et al. 2010. “Local content requirements in British Columbia’s Wind Power Industry.”
Faculty of Business – Pacific Institute for Climate Solutions. University of Victoria.
54. “Resources naturelles.” Quebec Energy Strategy 2006 to 2015. http://www.mrn.gouv.qc.ca/
english/energy/strategy/index.jsp
55. M. Sherrad and Thomas J. Timmins. “Canada: Quebec Announces Procurement of 700 MW of Wind Energy.” Gowlings Knowledge Centre.
56. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for International Economics. Page 54.
57. Ministry of Natural Resources and Environment, Government of India (MNRE). 2009. “Jawaharlal Nehru Solar Mission: Towards Building Solar India.” http://www.mnre.gov.in/file-manager/UserFiles/
mission_document_JNNSM.pdf
58. The Government of India also recently introduced an LCR for thin film.
59. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for International Economics. Page 71.
60. Shiao, M.J. 2012. “Thin Film Manufacturing Prospects in the Sub-Dollar-Per-Watt Market.”
Greentech Solar.
61. Bridge to India. 2012. “The India Solar Handbook: November 2012 Edition.” http://bridgetoindia.
com/our-reports/the-india-solar-handbook.
62. Deign, J. 2012. “What is behind India’s love affair with thin film?” PV Insider.
63. Mat Dirjish. 2012. “What’s the Difference between Thin Film and Crystalline Silicon Solar Panels,” Electronic Design. http://electronicdesign.com/article/components/whats-difference-thinfilm-crystallinesilicon-solar-panels-73937.
64. Hufbauer, Gary Clyde et al. Forthcoming 2013. “Local Content Requirements: A Global Problem.”
Peterson Institute for International Economics. Page 79.
65. Ibid., page 69.
66. Ibid., page 72.
67. Jah, Vyomi. 2011. “Cutting Both Ways: Climate, Trade and the Consistency of India’s Domestic Policies.” CEEW Policy Brief. New Delhi: Council on Energy, Environment and Water.
68. “Laying the Foundation for a Bright Future: Assessing Progress under Phase 1 of India’s National Solar Mission.” 2012. Council on Energy, Environment, and Water; Natural Resources Defense Council.
69. Inside US Trade. 2013. “U.S. Seeks WTO Consultations With India Over Solar LCRs, Subsidies.”
Available at: http://insidetrade.com/Inside-US-Trade/Inside-U.S.-Trade-02/08/2013/us-seeks-wto-consultations-with-india-over-solar-lcrs-subsidies/menu-id-172.html
70. Monkelbaan, Joachim. December 2011. “Trade Preferences for Environmentally Friendly Goods and Services.” ICTSD Working Paper. Page 4.
71. Kuntze, Jan-Christoph and Tom Moerenhout. “Local content Requirements and the Renewable Energy Industry – A good match?” ICTSD Issues Paper. Page 22.
72. Monkelbaan, Joachim. December 2011. “Trade Preferences for Environmentally Friendly Goods and Services.” ICTSD Working Paper. Page 2.
73. An Asian Development Bank (ADB) project is doing just this, offering to guarantee a maximum of $150 million in loans to Indian solar developers. See ADB, “India Solar Generation Guarantee Facility,” http://www.adb.org/site/private-sector-financing/india-solar-generation-guarantee-facility.
74. It should be noted that if all countries adopt LCRs as part of their environmental policies, then these measures will simply negate each other, as LCRs to be effective rely on technology transfer from the more mature technology locations.
75. More specifically, Annex C of the APEC Leaders Honolulu Declaration is on “Trade and Investment in Environmental Goods and Services”. In the paragraph devoted to LCRs, APEC economies commit to ..”Eliminate, consistent with our WTO obligations, existing local content requirements that distort environmental goods and services trade in the region by the end of 2012, and refrain from adopting new ones, including as part of any future domestic clean energy policy”
See APEC Leaders Honolulu Declaration in date of 13 November 2011 at http://www.apec.org/
meeting-papers/leaders-declarations/2011/2011_aelm.aspx.
76. See paragraph 8 of the CTI Chair’s Report, prepared for the Second Senior Officials’ Meeting of APEC Economies, Surabaya, Indonesia, 18-19 April 2013, in document 2013/SOM2/016.
77. The ICC World Trade Agenda Summit was held prior to the ICC 8th World Chambers Congress on 24 April 2013 attracting over 1,000 business leaders and representatives from 12,000 chambers of commerce worldwide. The Congress participants approved a set of five recommendations for a meaningful interim Doha Round package, to be presented to the G20 Meeting in Saint Petersburg and the Bali 9th Ministerial Conference in December 2013. The ICC World Trade Summit discussed a Peterson Institute study showing that potential gains to be had from a WTO agreement on liberalizing trade in environmental goods and services could produce $10.3 billion of additional exports See http://www.ameinfo.com/icc-global-trade-deals-generate-exports-338858
78. The idea of a SETA was already proposed in the study by the ICTSD on “Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement.” November 2011. ICTSD Issues Paper. Page xiii.
References Brewer, Thomas and Andreas Falke. 2012. “International Transfers of Climate-Friendly Technologies:
How the World Trade System Matters,” In Ockwell, David and Alexandra Mallet (eds)Low Carbon Technology Transfer: from Rhetoric to Reality. Routeledge, New York, NY.
Cosbey, A. (Ed.). (2008). Trade and Climate Change: Issues in Perspective.
Winnipeg: International Institute for Sustainable Development.
Deign, J. 2012. “What is behind India’s love affair with thin film?” PV Insider.
Dirjish, Mat. 2012. “What’s the Difference between Thin Film and Crystalline Silicon Solar Panels.”Electronic Design.
Farrell, John. 2011. “Maximizing jobs from clean energy.” The New Rules Project.
“Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement.” November 2011. ICTSD Issues Paper.
Hao, May et al. 2010. “Local content requirements in British Columbia’s Wind Power Industry.”
Faculty of Business – Pacific Institute for Climate Solutions. University of Victoria.
Hufbauer, Gary Clyde et al. 2013.“Local Content Requirements: A Global Problem.” Peterson Institute for International Economics.
“Japan Challenges Canadian Sustainable Energy Incentives at WTO.” 2011.Bridges Trade BioRes 10 (17). Geneva: ICTSD.
Janssen, Ron. 2010. “Harmonising Energy Efficiency Requirements - Building Foundations for Cooperative Action. Environmental Goods and Services Series.” ICTSD Issues Paper.
Jha, Veena. 2009. “Trade Flows, Barriers and Market Drivers in Sustainable energy Supply Goods:
The Need to Level the Playing Field. Environmental Goods and Services Series.” ICTSD Issues Paper.
Jha, Veena. 2008. “Environmental Priorities and Trade Policy for Environmental Goods: A Reality Check.” ICTSD Issues Paper.
Jha, Vyomi. 2011. “Cutting Both Ways: Climate, Trade and the Consistency of India’s Domestic Policies.” CEEW Policy Brief. New Delhi: Council on Energy, Environment and Water.
Jie-A-Joen, Clive, Rene Belderbos and Leo Sleuwaegen. 1998. “Local content requirements, vertical cooperation, and foreign director investment.” Faculty of Economics and Business Administration, Maastricht Univeristy.
Inside US Trade. 2013. “U.S. Seeks WTO Consultations With India Over Solar LCRs, Subsidies.”
available at http://insidetrade.com/Inside-US-Trade/Inside-U.S.-Trade-02/08/2013/us-seeks-wto-consultations-with-india-over-solar-lcrs-subsidies/menu-id-172.html
“International Trade and Climate Change: Economic, Legal, and InstitutionalPerspectives.”2007.
Washington, D.C.: World Bank.
References
Kuntze, Jan-Christoph and Tom Moerenhout. Forthcoming.“Local content Requirements and the Renewable Energy Industry – A good match?”ICTSD Issues Paper.
Laborde, David and Csilla Lakatos. 2012.“Market Access Opportunities for ACP Countries in Environmental Goods.” ICTSD Issues Paper.
Lako, Paul. 2008.“Mapping Climate Mitigation Technologies and Associated Goods within the Renewable Energy Supply Sector. ICTSD Programme on Trade and Environment.” ICTSD Issues Paper.
“Laying the Foundation for a Bright Future: Assessing Progress Under Phase 1 of India’s National Solar Mission.” 2012. Council on Energy, Environment, and Water; Natural Resources Defense Council.
Lewis, Joanna and Ryan Wiser. 2005. “Fostering a Renewable Energy Technology Industry.”
Environmental Technologies Division, Ernesto Orlando Lawrence Berkeley National Laboratory.
“Liberalization of Trade in Environmental Goods for Climate Change Mitigation: the Sustainable Development Context.” August 2008. ICTSD publication together with the Germany Marshall Fund of the U.S. and the International Institute for Sustainable Development.
Marion Fraser, Fraser & Company. 2009. “Developing Ontario’s Green Energy and Green Economy Act to its Full Potential.” Fraser & Company.
Meléndez-Ortiz, Ricardo. Editor. 2013. “Global Challenges and the Future of the WTO.” ICTSD Issues Paper.
Monkelbaan, Joachim. December 2011. “Trade Preferences for Environmentally Friendly Goods and Services.” ICTSD Working Paper.
Moon, Gillian. 2009. “Capturing the Benefits of Trade? Local Content Requirements in WTO Law and the Human Rights-Based Approach to Development,” University of New South Wales Faculty of Law.
Available at SSRN: http://ssrn.com/abstract=1392049 or http://dx.doi.org/10.2139/ssrn.1392049.
Rivers, Nic and Randy Wigle. 2011. “Local content requirements in renewable energy policies: Ontario’s feed-in tariff.” Stockholm.Paper presented at International Association for Energy Economics, Stockholm, Sweden.
Selivanova, Yulia. 2007. “The WTO and Energy: WTO Rules and Agreements of Relevance to the Energy Sector.” ICTSD Issues Paper.
Shiao, M.J. 2012. “Thin Film Manufacturing Prospects in the Sub-Dollar-Per-Watt Market.” Greentech Solar.
Tomsik, Vladimir and Jan Kubicek. 2006. “Can local content requirements in international investment agreements be justified?” NCCR.
Veloso, F. 2001. Local content requirements and industrial development: Economic analysis and cost modeling of the automotive supply chain. Massachusetts Institute of Technology, Engineering Systems Division.
Wilke, Maria. 2011. “Feed-in Tariffs for Renewable Energy and WTO Subsidy Rules.” International Center for Trade and Sustainable Development.
Wilke, Maria. 2011. “Feed-in Tariffs for Renewable Energy and WTO Subsidy Rules.” International Center for Trade and Sustainable Development.