World Trade Organization Draws The Shade On Local Solar Projects In India #WTO #SolarRuling

On September 16th, the World Trade Organization (WTO) ruled against India’s appeal to its February 2016 decision against buy-local policies in India’s ambitious solar energy initiative. The successful initiative, which at its base offers solar power companies government subsidies and long-term contracts, has already fostered the development of more than 8,000 megawatts of solar power in India. The initial complaint to the WTO was filed by the United States in 2014.

The ruling follows on the heels of India filing its own complaint with the WTO earlier this week against the U.S.’s own buy-local policies in eight states’ clean energy programs.

In response, Ilana Solomon, director of the Sierra Club’s Responsible Trade Program released the following statement:

“Today’s final ruling has undermined a successful solar initiative slated to bring us one step closer to tackling the climate crisis while creating local clean energy jobs. Yet the WTO has chosen to look beyond the world’s need for clean, modern, sustainable sources of energy, demonstrating the very real dangers harmful trade cases pose for our environment, our air, our water, and our climate.

“With the Paris Climate Agreement on the brink of becoming our new international reality, the world has reached a precipice on our current model of trade: Do we continue with status quo corporate trade rules that are fundamentally at odds with climate imperatives? Or do we stop these harmful trade cases, reject toxic trade deals like the Trans-Pacific Partnership, and collectively move toward a responsible, climate-friendly model of trade? The choice couldn’t be more clear, and the time to act is now.”

Background on the cases:

• India’s National Solar Mission aims to reduce the cost of solar power “through rapid scale-up of capacity.” The program is a core component of the country’s contribution to the Paris agreement to tackle climate disruption. India has already installed more than 8,000 megawatts of solar capacity under the program and aims to achieve 100,000 megawatts by 2022, which would make India one of the world’s largest solar energy producers.
• Under the program, solar power firms can secure government funding for project costs and long-term contracts to sell electricity to the government – some such benefits are contingent on using solar cells and modules manufactured in India. This “buy-local” requirement is designed to boost India’s capacity to domestically manufacture solar panels. Only a small fraction (reportedly 10 percent) of India’s target solar capacity is slated to be covered by buy-local provisions, meaning the country’s solar cell market remains significantly open to U.S. firms.
• The United States officially launched its WTO case against the buy-local provisions of India’s solar program in 2014. In February 2016, the WTO ruled against the provisions, arguing that they “accord less favorable treatment” to imported solar components, even while acknowledging that “imported cells and modules currently have a dominant share of the market for solar cells and modules in India.” India appealed the ruling in April 2016. In today’s ruling on the appeal, the WTO rejected India’s argument that the buy-local provisions of its solar program were “necessary to secure compliance” with India’s “obligations relating to climate change,” and implied that no challenged policy could be justified as “necessary to secure compliance” with the United Nations Framework Convention on Climate Change. India has no further option for appeal, and now must decide whether to alter its solar program to avoid WTO-authorized trade sanctions from the U.S..
• Many U.S. states have similar buy-local requirements for renewable energy programs, which help to cultivate clean energy entrepreneurs and build domestic constituencies to promote strong climate policies. India is threatening to launch a WTO case against the U.S. over such buy-local renewable energy programs in eight states, as retaliation for the U.S.’s case. Here are examples of such programs in some of the named states:
  • California has a successful rebate program that includes incentives for wind energy technologies manufactured in California.
  • Washington has a similar program to encourage small-scale renewable energy production, with incentives for solar and wind components made in Washington.
  • Minnesota also provides financial incentives to homeowners and businesses that install solar modules that are made in-state.
  • Connecticut’s Green Bank, which provides financial assistance for renewable energy projects, is required by state law to prioritize projects with components manufactured in Connecticut.
  • Michigan has an incentive program in which renewable energy generated from equipment made in-state receives an additional 10 percent of renewable energy credits for the first three years of operations.
  • Delaware has a similar incentive program in which renewable energy providers receive an additional 10 percent of renewable energy credits where at least half of the cost of solar or wind installations is from equipment manufactured in-state.
  • These WTO complaints and cases against buy-local renewable energy programs echo a 2013 WTO ruling against the buy-local provisions in a groundbreaking clean energy program in Ontario, which had successfully reduced climate-disrupting emissions while creating thousands of clean energy jobs. Three weeks after the WTO’s ruling, Ontario eliminated its “buy-local” provisions and ended incentives for large-scale clean energy projects.
• The TPP replicates the very rules at issue in the U.S.’s WTO case, and India’s WTO complaint, over buy-local renewable energy programs. While many in Congress oppose the TPP, if the deal were to pass, it would provide an additional forum for trade cases against policies that create local clean energy jobs.