The Rise of Renewable Energy Protectionism: Emerging Trade Conflicts and Implications for Low Carbon Development

Now a $244 billion dollar industry globally, the political economy of renewable energy around the world is becoming increasingly consistent.⁴ Many countries have identified renewable energy as a strategic industry for promoting economic development.⁵ Because the social benefit of reducing greenhouse gas emissions is not generally reflected in cost structures, the deployment of socially desirable technologies is generally not economically profitable.⁶ As a result, governments use policy tools to adjust relative prices to encourage the adoption of alternative energy technologies through subsidies or other forms of public support.⁷ To garner such support, the political rationale for renewable energy, namely carbon mitigation, is increasingly being directly linked to the economic rationale, namely job creation and technological leadership. While the carbon mitigation benefits of renewable energy may be global, economic development impacts are a benefit of renewable energy utilization that can be captured locally.

During the global economic slowdown of the past few years, it has been even harder for governments to justify extending the costs associated with renewable energy to ratepayers unless they can also make the case for other direct economic benefits from promoting renewables, such as job creation and long-term economic competitiveness.⁸ As a result, countries have increasingly been using protectionist policies to encourage domestic manufacturing for renewable energy and raise barriers to foreign entry into domestic markets.⁹ Not all countries are well positioned to become competitive exporters of the same green technologies, but if industrial policies can help create competitive domestic manufacturers, there may be direct domestic economic benefits. There may be global benefits as well; new market entrants can lead to more competition in the sector, and encourage further technological innovation.¹⁰

The fundamental principles of the global trading system, now enshrined in the WTO, directly conflict with the concept of a domestic strategic industry supported by national policy incentives.¹¹ The “most favored nation” principle prevents discrimination against specific trading partners. The “national treatment” principle calls for equal treatment of imported and locally produced goods in the marketplace. Additional principles aimed at promoting fair competition and non-discrimination, including dumping and subsidy regulations, aim to establish a level playing field as goods are traded across borders. However, if free trade is viewed as a means to promote economic growth, government intervention may be more a result of disagreement over distributional impacts than fundamental principles, as governments try to capture these benefits for their own jurisdictions.

These overarching principles are translated into specific provisions and agreements that can be used to dispute a range of national level industrial policy support. In addition to the WTO Agreement on Subsidies and Countervailing Measures (SCM), several other WTO provisions are relevant to industrial policy support for renewable energy. For example, the Government Procurement Agreement (GPA), while limited in signatories, targets the use of government purchasing and procurements to achieve domestic policy goals, including the promotion of specific local industry sectors. Other WTO provisions related to intellectual property rights and technology transfer are directly relevant to industrial policies. The Trade Related Investment Measures (TRIMS) provision of the WTO restricts local content requirements as well as technology transfer requirements. The Trade Related Intellectual Property (TRIPs) agreement explicitly addresses IPR enforcement, which also has implications for industrial policies and market access regulations.

The environmental rationale to support renewable energy may be insufficient to invoke exceptions to trade rules. Invoking, for example, GATT Article XX to justify the use of certain subsidies or industrial policies supporting renewable energy technology manufacturing or deployment may require member countries to demonstrate a complex, rather indirect link between renewable energy technology and health, and to show that such measures are necessary to displace fossil fuels and prevent climate change.¹² Furthermore, many of the measures in question that violate the SCM Agreement may not be eligible for GATT Article XX exceptions in accordance with recent Appellate Body decisions in ongoing disputes.¹³

While a variety of policy tools are used to promote the use of renewable energy, protectionist industrial policies and certain government subsidies pose the most direct conflict with international trade law. Examples of policies commonly used to support renewable energy industry development and the countries where they are used presented in Table 1. Particularly common is the use of direct subsidies either via subsidized electricity tariffs (feed-in tariffs) or capital subsidies, grants, rebates, or favorable loan terms. Even traditional subsidy policies may have an industrial policy element; e.g., a national subsidy to promote local industry growth, such as a feed-in tariff or a tender program with a local content requirement.

Less common but still quite frequently used are local content requirements (LCR) that aim to encourage local over imported renewable energy technologies. Policies that encourage domestic manufacturing and technology transfers may create a particular problem with respect to international trade law that explicitly prohibits differential support to domestic over foreign technology. Other policies that may provide preferential treatment to local industries include financial or tax incentives directly used to promote local manufacturing, research and development (R&D) support for local firms, and the use of import tariffs or customs duties to support particular industries or to encourage domestic manufacturing. Export credit assistance is sometimes used to promote local industries abroad. While many programs pose potential conflicts with international trade law, minimal legal precedent exists on which to base such analysis.¹⁴

Perhaps no country has used industrial policy to promote renewable energy as effectively, and as controversially, as China. China’s policies to promote renewable energy have long included mandates and incentives to support the development of domestic technologies and industries.¹⁵ While some elements of these policies, such as LCRs, are unduly protectionist, others are far less controversial, such as R&D support, technology certification and quality control programs, and fiscal or other tax-related incentives. The Chinese government has identified several renewable energy industries as strategic national priorities for science and technology (S&T) investment, and established a constant and increasing stream of government support for R&D and technology demonstration. Other forms of industry support have been given through more informal channels, such as low interest loans or other favorable loan terms given by central and local governments and state-controlled banks, low-cost land grants, or expedited permitting.

As Table 1 demonstrates, however, China is certainly not the only country that has relied on industrial policy mechanisms to promote renewable energy industries. Other notable examples include the 2003 wind power tenders issued by Quebec that included mandates for using local content as the Gaspé¹⁶ Several of Spain’s autonomous regional governments have insisted on the local assembly and manufacture of turbines and components before granting development concessions, and Brazil’s PROINFA program aimed to achieve a 60-percent local content rate for wind power technology by making project loans from the Brazilian development bank (BNDES) contingent on turbine manufacturers’ ability to meet this requirement.¹⁷ More recently, the Indian National Solar Mission included the mandated use of domestically manufactured solar photovoltaic technology and a mandated 30-percent local content requirement for solar thermal technology.¹⁸

While there have been relatively few international trade challenges in the renewable energy technology sector, this field has evolved rapidly since mid-2010. The growing scale of the renewable energy sector and the size of the market at stake may mean that it is no longer immune to high-profile WTO challenges. This section reviews the evolution of the key cases that target the wind and solar industries focusing on the context behind each dispute and the relationship between the various disputes.¹⁹ The discussion is organized by type of dispute, rather than by country or by case, to aid in cross-case comparison.

In August 2009, German photovoltaic (PV) companies SolarWorld and Conergy raised concerns about China’s solar practices, requesting that an AD investigation of Chinese PV exports be initiated by the EU. Claiming that Chinese PV price levels were impossible to maintain without state aid, they pointed to China’s Golden Sun Program and Solar Rooftops Program, which provided direct subsidies to panel deployment in China and could influence module costs.²⁰ While the EU opted not to pursue an investigation of China’s program at that time, tensions in the solar industry began to escalate.

In September 2010, the United Steelworkers (USW) filed a petition with the US Trade Representative (USTR) requesting that it investigate China’s violation of its WTO commitments in clean energy, marking the start of what would be become multiple US investigations of China’s renewable energy practices.²¹ The lack of an EU investigation and the watered-down response to the USW petition led several solar companies with a US presence, including SolarWorld, to form the Coalition for American Solar Manufacturing (CASM) and file a petition with the US Department of Commerce and International Trade Commission (ITC) requesting that the US government challenge China’s “illegal” subsidies to solar companies and develop tariffs for Chinese crystalline silicon PV products.²²

The ITC initiated investigations on both antidumping duties (AD) and countervailing duties (CVD), which led to the ITC’s preliminary finding that the US solar industry had suffered “material injury,” establishing the necessary pre-conditions for the US to impose duties on Chinese solar imports. Final determinations were released in October 2012 with final dumping margins ranging from 18.32 to 249.96 percent and countervailable subsidies from 14.78 to 15.97 percent.²³ An appeal filed by CASM in February 2013 aimed to expand the scope of the original case in response to claims that Chinese manufacturers were able to reconfigure their supply chains to evade duties on imports to the United States.²⁴ In June and July 2014 the scope of coverage was expanded and tariffs increased.²⁵ A July 2014 WTO ruling has called into question the US practices towards calculating CVDs, and the US Government has been asked to bring its duties in line with the WTO SCM agreement.²⁶

Meanwhile, three related disputes targeting the solar industry were launched. The first was by China, in November 2011, in what appeared to be a direct retaliation to the US dispute and targeting several subnational renewable energy support programs in US states that may have used LCRs (elaborated below). In the second related case, the Chinese Ministry of Commerce (MOFCOM) launched an AD and CVD investigation in July 2012 into polysilicon from the US and South Korea, later expanded to include the European Union.²⁷

The third related case came from the EU targeting the Chinese solar industry. In July 2012, the EU company ProSun filed a petition with the European Commission on behalf of EU solar producers against China, and two months later the European Commission announced the initiation of an AD investigation on imports of crystalline silicon photovoltaic modules and key components originating in China. ProSun later filed another complaint with the European Commission to initiate an anti-subsidies probe into imported Chinese solar glass. Despite multiple negotiations between Chinese and European politicians, the European Commission decided to impose provisional antidumping duties in June 2013. While duties averaging 47.6 percent were announced, the EU opted to postpone imposing the full tariffs until August and instead imposed an 11.8 percent rate, reportedly to allow time for further negotiations.²⁸ Within days, China launched a trade investigation against European wine exports, likely in response to the solar tariffs.²⁹ But on July 27, 2013, in a surprisingly conciliatory move, a price undertaking was worked out between the EU and Chinese governments. They agreed to an import quota of 7 GW per year to be applied to Chinese-made solar panels, along with a minimum import price of €0.56 per watt. Companies not agreeing to participate in the undertaking were subject to the original 46.7 percent duty, while those participating were exempted.³⁰

In addition to the solar investigations described above, a trade dispute surrounding the Chinese wind industry emerged in late 2011 when a few US wind component companies formed the Wind Tower Trade Coalition and filed a petition asking the US Department of Commerce to initiate CVD and AD investigations on imports of utility scale wind towers from China (and Vietnam). The Commerce Department initiated investigations on a portion of the claims listed in the January 2012 petition, including cash grants, cheap raw materials, free land, electricity, preferential loans and credit, and tax exemptions, among others. Preliminary tariffs were set in May 2012 at 26 percent, with the Commerce Department raising AD rates for Chinese firms to 45–71 percent and CVD rates to 22–35 percent in December 2012; the ITC approved these rates in January 2013.³¹

Yet another AD investigation against the solar industry was launched in response to a petition filed by the Indian Solar Manufacturers’ Association on November 23, 2012 by India’s Ministry of Commerce against solar cells originating in China, Chinese Taipei, Malaysia, and the US.³² The case is also likely related to failed attempts to promote domestic solar manufacturers in India, including through the use of LCRs. Indian manufacturers have had trouble competing with more established overseas companies, including those based in the countries targeted in this dispute.³³ A US challenge against India’s national solar program at the WTO followed the announcement of the Indian investigation, as discussed in the following section.

The first-ever case concerning a specific renewable energy support program was challenged under the WTO when Japan initiated bilateral consultations with Canada over Ontario’s feed-in tariff (FIT) programs for wind and solar in September 2010. Japan claimed that Ontario’s renewable energy FIT program unfairly discriminated against foreign renewable energy products with its local content provision and was a prohibited subsidy, that it violated the national treatment requirements of the General Agreement on Tariffs and Trade (GATT), and that it was inconsistent with the TRIMs Agreement, in addition to being a prohibited subsidy under the SCM Agreement.³⁴ Canada, however, argued that its FIT is a form of government procurement designed to ensure the affordable generation of clean energy in Ontario, and consequently not subject to WTO agreements. Both the US and the EU joined the consultations in September 2010. Japan found initial consultations to be unsuccessful and in June 2011 requested that the WTO launch a dispute settlement panel. The EU had separately challenged the program in August 2011 and another panel was convened, causing the two panels to investigate in parallel and coordinate their findings.

The panels took longer than the usual six months to produce their final reports, which were released on December 19, 2012. The panels sided with Japan (and the EU) on most of their claims, including the GATT and TRIMS violations, but were divided on the subsidy issue. Canada appealed the decisions in February 2013, and the Appellate Body (AB) reports for the two disputes were released on May 6, 2013. The AB held that Ontario’s FIT program was inconsistent with Canada’s international trade obligations, including that the LCR gave preferential treatment to products made in Ontario and was in violation of the national treatment obligation in the TRIMS agreement as well as Article III of the GATT, though it disagreed with the panel’s analysis on a few points of law, including the subsidy determination.³⁵ As a result Canada was told to bring its programs into compliance.

The second related case targeted a Chinese wind subsidy program. The investigation was initiated by the same September 2010 USW petition that triggered multiple US investigations of China’s renewable energy practices, including the AD and CVD investigations discussed above. After investigating the petition’s claims, in December 2010 the USTR announced that out of the long list of Chinese policies and programs mentioned in the USW petition it would only investigate one Chinese wind subsidy program that included a LCR. Consultations with China were launched under the WTO on December 22, 2010, with both the EU and Japan joining these consultations in January 2011.³⁶ WTO consultations were apparently not needed, however, when bilateral trade discussions between China and the US resulted in the USTR claiming success after China agreed to remove the subsidy program and associated LCR in June 2011.³⁷

While on this surface this may look like a successful bilateral intervention to prevent a larger trade conflict, in fact China’s reasons for opting to remove the wind LCR were likely more economically than politically driven. After the agreement was announced, multiple Chinese stakeholders reported that the LCR currently had a very minor impact on its wind industry and that its removal was insignificant.³⁸ Since China had long used industrial policies that were questionable under WTO to help build its highly successful wind industry, such programs had likely already served their purpose by the time they were questioned by the US government.

The third dispute surrounding renewable energy support measures was launched by China just after US solar manufacturers filed a petition targeting the Chinese solar industry (discussed above). On November 25, 2011 China’s Ministry of Commerce (MOFCOM) announced that it was initiating its own investigation of US renewable energy policy support and subsidies in response to a petition raised by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products and the New Energy Chamber of Commerce of the All-China Federation of Industry and Commerce. The petition claimed that several state-level renewable energy incentives violated provisions specified in Foreign Trade Law of the People’s Republic of China and Investigation Rules of Foreign Trade Barriers.³⁹ On May 24, 2012, MOFCOM released its preliminary conclusion, finding that the Washington Funds Project to Encourage Renewable Fuel Production, Wind Generation and Manufacturing Projects of Ohio, State Energy Program of New Jersey, State Rebate Program of Massachusetts, and California’s Self-Generated Incentive Program constituted prohibited subsidies and violated provisions of Article 3 of SCM Agreement and Article 3 of the GATT. However, China did not attempt to impose any retaliatory measures or trade remedies.

The fourth case targeting local content requirements was launched on November 5, 2012, when China requested WTO consultations with the EU, Greece, and Italy on various EU feed-in tariff programs, claiming that they were inconsistent with elements of the GATT, SCM Agreement and TRIMS Agreement.⁴⁰ Japan, Australia, and Argentina asked to join the consultations, and as of June 2014 the consultations are still pending.

A fifth case concerning local content requirements in renewable energy support programs was initiated by the US against India in February 2013. The WTO consultations concern certain measures under the Jawaharlal Nehru National Solar Mission that contain domestic content requirements for solar cells and solar modules, claiming that they violate the SCM agreement, the GATT, and the TRIMs agreements.⁴¹ By June 2014 10 other countries had jointed the consultations, and a WTO panel was being formed.⁴²

There are signs that India may respond to the US-led dispute against its solar programs with a dispute against US state-level renewable energy support programs. In April 2013, India requested that the US clarify its subsidy programs to promote renewable energy, expressing concern that some of these programs have provisions “relating to local or domestic content requirements which raise issues of consistency” with the SCM Agreement, the TRIMS agreements, and the GATT. The query mentions a Minnesota program that provides rebates to consumers purchasing PV panels manufactured in Minnesota, as well as similar programs in Massachusetts and Connecticut.⁴³ Other programs being investigated by India include Michigan’s Clean, Renewable, and Efficient Energy Act (Public Act 295), which gives credits for local equipment and local labor; the Los Angeles Solar PV Incentive Program, which provides higher incentives for locally installed projects and local manufacturing; the California Self Generation Incentive Program, which provides incentives for using energy storage technologies from California suppliers; and the Austin Solar PV Performance-Based Incentive Program, which gives a higher incentive to equipment manufactured in the Austin Energy service area.⁴⁴

The current set of renewable energy-related disputes (summarized in Table 2) highlights the key policies being targeted, and the timing of several of the disputes suggests multiple instances of retaliation. Yet many countries, in addition to those currently being targeted, are likely guilty of international trade violations and use potentially controversial policies, as seen in Table 1. To clarify what led to the rise in renewable energy related trade disputes and why have certain countries been targeted and not others, this section examines four likely drivers of trade disputes in the renewable energy sector: (1) the increasing scale of the renewable energy industry; (2) the increasing role of emerging markets, especially China; (3) the increasing imbalances between renewable energy technology producers and users, and (4) the rise of locally owned technology manufacturers in key markets.

While renewable energy subsidies and protectionist policies have been utilized around the world for several decades, the rise in trade-related disputes has coincided with the recent rapid growth in the sector. Total investment in clean energy (including both renewable energy and energy efficiency) was up 486 percent in 2012 from 2004 levels. While wind power has maintained a rather steady share of clean energy investment over this time period (from 42 to 48 percent), solar has seen a dramatic increase in its share of total investment, growing from 2 to 36 percent.⁴⁵ Even more notable is the sharp increase in solar investment between 2010 and 2011 (Figure 1). This rise corresponds with the timing of the rise in trade-related tensions surrounding the global solar industry.

Another important trend in the clean energy industry is the increasingly dominant role of China, which has attracted a steadily increasing share of global investment in recent years (Figure 2). This is also reflected in its dramatic build-out of both wind and solar power capacity in recent years. As of 2012 China was the largest installer of wind power capacity in the world, and its wind turbine manufacturers had 21 percent of global market share.⁴⁶ China’s solar manufacturing sector (including solar cell and module manufacturers) has been the largest in the world for several years, but since 2010 China’s own use of solar power has taken off. In 2012 China installed 3.2 GW of solar photovoltaics, representing 12 percent of global installations. At the same time, both the US and EU have seen declining solar power investments in recent years, with the exception of increases experienced in the US between 2009 and 2011, primarily as a result of federal stimulus funds directed at clean energy.⁴⁷

Countries that are leading in renewable energy technology manufacturing are not necessarily the same countries leading in renewable energy deployment. Imbalances in manufacturing and utilization of renewables leads to a need for imports and exports, and substantial imbalances can be grounds for international trade tensions.

As recently as 2010, the US had a positive trade balance with China in the solar sector, even though China led in module and cell production. This is because the US has been exporting higher value segments of the PV supply chain to China—namely PV capital equipment and polysilicon—and importing lower value segments—namely PV modules. This changed in 2011, however, when the US imported more PV equipment from China overall (measured in monetary value) than it exported, resulting in a net trade deficit (Figure 3). This shift certainly played a role in heightening trade tensions between the US and China in the solar industry during 2011.

While declining exports and increasing imports may have triggered the US solar trade dispute with China, Europe is a far larger importer of Chinese solar photovoltaic technology than the US, and a minimal exporter. In 2011, EU solar imports from China were almost $28 billion, which is much larger than the United States’ $3 billion in imports or than European solar exports to China of $7.5 billion.⁴⁸ Europe represents about 60 percent of China’s solar export market and about 7 percent of China’s total exports to the European Union.⁴⁹ In fact the EU-China solar dispute represents the most significant anti-dumping complaint the European Commission has ever investigated.⁵⁰

A notable outcome of these solar trade disputes targeting China was a clear division within the domestic US and EU industries in supporting these trade measures. While CASM is coalition of US solar manufacturers that initiated investigations against China’s solar practices, the Coalition for Affordable Solar Energy (CASE) was formed in November 2011 to oppose CASM’s petition. CASM, led by SolarWorld, included primarily module manufacturers, while CASE members included many US solar installers like SolarCity, SunRun, and Sungevity that often utilize panels made in China. Many US-based polysilicon manufacturers, as well as the Semiconductor Equipment and Materials International (SEMI), spoke out against the use of trade sanctions due to the harm it would inflict on the entire industry, with some companies noting concerns about retaliation from China.⁵¹ The EU saw similar splits along the solar supply chain. The EU ProSun Group, comprised of companies representing over 25 percent of EU crystalline silicon PV module production, led the filing of anti-dumping and anti-subsidy complaints against China, while the Alliance for Affordable Solar Energy (AFASE) sent a letter to the European Trade Commissioner signed by 1,024 companies opposing the solar import tariffs.⁵²

Protectionist policies such as LCRs aim to encourage the development of domestic renewable energy manufacturing companies. The Chinese wind industry has been one beneficiary of such support measures, as previously discussed. While several factors contributed to the rise of many new wind turbine manufacturers in China, the implication of their rise has been added competition for the foreign firms operating within the Chinese market.⁵³ As China’s wind market has become the largest in the world , China’s homegrown wind turbine manufacturers have been able to capture the majority of Chinese market share (Figure 4), increasing competitive tensions between foreign and Chinese firms. While the US challenge to China’s LCR in wind power was removed in bilateral negotiations, the current size of the Chinese market, coupled with the dominance of Chinese firms, may again make the Chinese wind industry the target of future trade disputes.

Can renewable energy deployment continue in the face of increasing trade disputes? Current trade disputes threaten the very support measures that have led to the recent surge in renewable energy investment. Solar power use in particular is still directly tied to national subsidy programs. The recent tariffs levied on the Chinese solar industry will directly impact the cost of solar technology in leading markets, and will directly slow solar deployment.⁵⁴ The only way to prevent this would be through further subsidization from the countries that have implemented tariffs, resulting in an even larger market distortion. Determination of AD and CVDs require calculations of fair market prices, which are further complicated by China’s heavy state control (including in the solar industry), as well as rapidly declining solar module and input materials prices.

China is both singled out for its high emission development pathway and for its problematic support of its own clean energy industries. This creates a particular challenge for policymakers within China trying to encourage the utilization of low carbon technologies, as well as in the US and EU trying to entice China to commit to a global climate change treaty with an implicit low carbon development pathway. The role Chinese wind and solar industries have played in increasing total manufacturing scale has likely been a key contributor to global technological learning, with benefits for future deployment of these technologies around the world.⁵⁵

The wind and solar industries, while experiencing a dramatic expansion, are still small compared with the fossil energy industries, and installed capacity has a very long way to go to make a real contribution to climate mitigation. A change in the way energy resources are subsidized and priced globally, or the introduction of a high price on carbon, could change the political economy of renewable energy support. But for this expansion to continue under the current political and economic rationale for renewable energy support, subsidies and policies that encourage local economic development benefits must persist; as a result, continued trade conflict seems inevitable.

The challenge of climate change and other environmental problems, along with national energy security concerns, have resulted in the increased use of policies to promote renewable energy. As renewable energy deployment expands, conflicts between renewable energy policy and trade policy are likely to escalate. This points to the need for a better international system to deal with issues related to clean energy and climate change, including subsidies, technology transfers, and trade in environmental goods and services.

One way to move forward would be to develop a new list of exempted subsidies for subsidies linked to the development and diffusion of low-carbon energy sources, comparable to the lapsed SCM Article 8 exemptions,⁵⁶ in the context of the ongoing Doha Round of WTO negotiations. While seemingly a straightforward approach, the Doha are notoriously deadlocked and may not be a viable means of developing new trade provisions in the near term. Furthermore, since key WTO members see their own economic competitiveness as inextricably linked to the success of their domestic renewable energy companies, it seems unlikely that they would agree to give up the right to challenge subsidies provided to those companies’ foreign competitors.

Until recently, similar difficulties have plagued the negotiations to establish an Environmental Goods and Services Agreement (EGSA) under the Doha Round mandate calling for “the reduction, or as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.”⁵⁷ Outside the WTO, however, progress on an EGSA seems increasingly possible. In 2012, the 21 members of the Asia-Pacific Economic Cooperation (APEC) conference agreed to a list of environmental goods, including renewable energy technologies, on which member countries must reduce their applied tariff rates to 5 percent or less by December 31, 2015; APEC has also taken up the issue of LCRs and alternative ways to achieve similar local economic development objectives.⁵⁸ In March 2014, 14 WTO nations, including the leading countries involved in ongoing trade disputes, agreed to begin negotiations on eliminating tariffs on a range of environmental goods, specifically citing the APEC decision as providing momentum for such negotiations.⁵⁹ While these talks are unlikely to lead to rapid decisions, this process opens the door to potentially constructive dialogue among the key countries involved.

Trade issues also are frequently discussed in the context of multilateral environmental negotiations, and particularly in the context of the meetings of the parties to the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol. For example, a technology mechanism to facilitate the implementation of enhanced action on technology development and transfer in order to support action on mitigation and adaptation to climate change was established at COP 17 in Cancun in 2010.⁶⁰ Still under development, the Technology Mechanism, either via the Executive Committee or the Climate Technology Center and Network, could serve as a platform for identifying types of low carbon energy support that should be protected from WTO challenge. There is some precedent for WTO dispute settlement panels deferring to multilateral environmental agreements in cases where there is a conflict,⁶¹ although the political will of the UNFCCC has waned since the 2009 Copenhagen Conference failed to produce the stringent global agreement many had hoped for. Past studies point out that without MEAs being exempted from WTO challenges, their authority in this space remains limited.⁶²

The regulation and coordination of energy issues in international law is highly fragmented, in that there is no overarching regulation that specifically addresses energy.⁶³ There are international organizations with this mandate, such as the International Energy Agency, but membership is limited to OECD countries and its agenda potentially dominated by a subset of these.⁶⁴ The International Renewable Energy Agency (IRENA), established in 2009 specifically to advance the adoption of renewable energy, has yet to venture into the trade sphere, and is still too young to sufficient political backing to take on the WTO. The large renewable energy industry associations, including those in the solar and wind industries with member companies from multiple parts of the world, have spoken out on recent trade disputes, and in some cases have even initiated them, but naturally take a self-interested perspective in line with their membership.

Due to the challenges associated with addressing renewable energy trade issues in the context of existing international agreements, some have proposed a new agreement that could take a holistic and integrated view of the sustainable energy sector and address a variety of market and trade-related barriers: a Sustainable Energy Trade Agreement.⁶⁵ While such an agreement could constructively inform and perhaps even shape the course of future negotiations and work at the WTO as well as the UNFCCC, it is not likely that the international political will to negotiate and implement a new agreement currently exists, for many of the reasons previously discussed.

While there is clearly a need to address the emerging conflicts between renewable energy policy and international trade law, negotiations involving many countries surrounding such politically charged issues such as trade and climate change may not be politically feasible in the time frame in which such an agreement would be needed. As a result, a more accessible alternative may be to defuse such conflicts through bilateral initiatives. Even major industry associations have called for bilateral resolution to the solar trade dispute.⁶⁶ Bilateral channels could address conflicts directly through bilateral clean energy agreements, or indirectly through jointly administered programs directed at clean energy innovation that would be mutually beneficial to countries that might otherwise seek to challenge each other’s subsidy programs. One such example is the US–China Clean Energy Research Center (CERC), which established a large-scale platform for collaborative clean energy technology development just as clean energy trade tensions between the two countries were escalating.⁶⁷ While the incentives for conflict may overpower the incentives for cooperation, efforts like the CERC make the case for continuing to take a collaborative approach to working with major trading partners, and could help diffuse tensions that lead to feuds before the WTO.

While the future incidence of renewable energy trade disputes is uncertain, all signs point to a likely increase in the coming years. As countries continue to develop policies to support their renewable energy industries, many legal questions still remain around which types of industrial polices constitute a direct conflict with exiting trade rules. But any dispute, won or lost, can still be costly for this fledgling industry. The expanded utilization of renewable energy technologies will be a crucial part of any climate change solution, and escalating trade tensions will increase both the economic and political costs of deploying these technologies around the world.