Clean Energy and Global Trade

7 October 2010 by Virginia Sonntag-O'Brien, REN21 Secretariat

Governments’ efforts to steer their countries out of the recession have given a strong boost to the renewable energy sector around the world. This growth has resulted in strong competition among countries vying for market leadership. And everyone is trying to push down their costs.

 The Japanese government has filed a complaint against Canada saying that the Ontario feed-in tariff violates World Trade Organization rules because to be eligible for the programme power generators must purchase 50 percent of the parts for their facilities from local manufacturers. The United States and the European Union have said they want to join the discussions between Japan and Canada because they have a stake in the outcome.

 The United Steelworkers union recently announced that it will file a trade complaint against China, with the US government protesting against renewable energy imports from China that it claims have benefited from protectionist policies.

China has blocked exports of rare earths to Japan over a fishing dispute between the two countries. Rare earth elements are currently used across the world and are the key to clean energy technologies like hybrid batteries and wind turbines. China produces some 95% of their supply.

The aforementioned complaints do not constitute cases before the WTO’s Dispute Settlement Body. Nor are they likely to reach that stage, as a trade war would not be in the interest of countries developing domestic clean energy industries, not least because it would raise the price of clean energy worldwide. As Michael Liebreich from Bloomberg New Energy Finance urges, the clean energy industry should “push for the liberalisation of trade and exchange rates, and for aggressive but fair competition”. But the global trading system still needs to come up with adequate rules and procedures on energy issues, for the sake of climate change mitigation and sustainable, low-carbon development.