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China Initiates WTO Challenge To European Green Energy Programs

Tuesday, November 6, 2012

GENEVA--China announced Nov. 5 it was initiating World Trade Organization dispute proceedings to challenge what it claims are discriminatory measures in green energy programs adopted by certain European Union member states.

In a statement made available through the Chinese mission in Geneva, Chinese Ministry of Commerce (MOFCOM) spokesman Shen Danyang was quoted as saying that the complaint focuses on subsidies granted through feed-in tariff (FIT) agreements for electricity power generated by photovoltaic installations.

The electricity powered by these solar installations is eligible for a specified amount or proportion of FIT subsidy if the main components of the installations are produced within the EU or among member countries of the European Economic Area (EEA), Shen said.

“China considers that the subsidies above violated relevant provisions of the WTO Agreement in respect of national treatment and most-favored-nation treatment, and also constituted prohibited subsidies under the WTO Agreement as contingent upon the use of domestic over imported goods,” the statement added.

The two sides will now have 60 days to discuss the Chinese complaint. If a settlement is not reached by then, China will be free to request the establishment of a WTO dispute panel to rule on its claims.

No Comment From EU

Under a feed-in tariff, regional or national electric grid utilities are required to purchase electricity from renewable sources such as solar, wind, or hydroelectric power, with producers given guaranteed prices under long-term purchase contracts.

Shen said that while China favored the development of renewable energies such as solar power to address energy security and climate change, countries should enhance cooperation and trade in the sector “instead of taking protectionist trade measures for short-term interest.”

EU Trade Spokesman John Clancy said the EU has received the consultation request and is “studying it now,” but declined to comment further.

Tensions Heightened

The announcement marks a further heightening of tensions between Beijing and its major trading partners over the emergence of China as a major supplier of parts and equipment for the green energy sector.

MOFCOM announced Nov. 1 that it was initiating an antidumping and countervailing investigation into solar-grade polysilicon imported from the EU (see related story).

This followed the EU’s announcement Sept. 6 that it was launching an antidumping investigation targeting Chinese solar panel imports (35 INER 851, 9/12/12).

MOFCOM has also been critical of a U.S. Commerce Department final determination issued Oct. 10 which found that China is both dumping solar cells and modules in the U.S. market and is also providing countervailable subsidies to those exports. Commerce assigned final antidumping margins ranging from 18.32 percent to 249.96 percent and final countervailing duties ranging between 14.78 percent to 15.07 percent in the case brought last year by SolarWorld Industries America in Oregon (35 INER 1009, 10/24/12).

Trade Attorney: Subsidies Distorting Market

White & Case international trade attorney Scott Lincicome told BNA Oct. 8 that a “lot of major economies, no matter their budget situation, are engaged in a subsidy race” that is “massively distorting the market” in green energy.

The WTO confirmed that it received a request from China for consultations with the EU to discuss provisions in the feed-in tariff programs of EU member states, “including, but not limited to, Italy and Greece,” which allegedly discriminate against foreign suppliers of equipment for solar energy generation facilities.

While the Chinese complaint specifically cites Italy and Greece, other EU member states may eventually see their FIT measures targeted. Germany’s law on renewable energy limits FIT payments for energy originating from installations located in Germany.

GATT Articles Cited

China charges that FIT provisions violate Article III:4 of the WTO’s General Agreement on Tariffs and Trade (GATT) by affording less favorable treatment to imported equipment and components for renewable energy generation facilities than given to like products originating in the EU and EEA.

The provisions also violate Articles 3.1(b) and 3.2 of the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) because they are contingent upon the use of equipment and components for renewable energy generation facilities produced in EU/EEA member states over equipment and components imported from other WTO members.

In addition, China charges the provisions violate the WTO’s Agreement on Trade-Related Investment Measures (TRIMs) by requiring the purchase or use by enterprises of equipment and components for solar energy generation facilities originating from or sourced in the EU and EEA.

Similar to Ontario Case

The Chinese case against the EU closely resembles the WTO dispute case initiated by the EU and Japan against the Canadian province of Ontario’s FIT program.

In the Ontario case, a WTO panel issued a confidential preliminary ruling Sept. 20 which found in favor of EU and Japanese claims that provisions in Ontario’s FIT program discriminate against foreign suppliers of equipment and components for renewable energy generation facilities (35 INER 976, 10/10/12).

At the center of the dispute were FIT provisions requiring wind and solar projects to include a minimum amount of goods and services that originate in Ontario. The panel is due to issue its final ruling sometime later this month.

According to a report commissioned by the German Ministry of Environment and issued in January, 24 of the EU’s 27 member states currently have feed-in systems in place based either on the feed-in tariff (which guarantees a fixed price per kilowatt of electricity) or the feed-in premium (which is paid on top of the market price for electricity).

The report also noted that 93 percent of all wind onshore capacity and nearly 100 percent of all photovoltaics capacity installed by the end of 2010 in Europe were initiated by feed-in tariff systems.

By Daniel Pruzin