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Ontario Clean-Energy Subsidies Break Rules, WTO Panel Says

Ontario Clean-Energy Subsidies Break Rules, WTO Panel Says

Ontario's subsidies for clean-energy producers that use local technology were ruled in breach of World Trade Organization regulations, supporting complaints by the European Union and Japan against Canada.

The province’s feed-in tariff, or FIT program, which pays above-market rates to generators of renewable energy that use Canadian-made equipment, undermines competition because it favors domestic products, according to a WTO panel report posted on the agency’s website today.

The federal government will appeal the decision, Kirby Dier, a spokeswoman for the Ontario Ministry of Energy, wrote in an e-mail. “Our position has always been that the FIT program is consistent with Canada’s obligations under the WTO agreements.”

The government’s Green Energy Act dictates that goods and labor from Ontario must account for 60 percent of supply costs at clean-power projects, depending on the type of renewable source. It’s aimed at helping the province meet a goal to shut all coal-fed generators by 2014 as it seeks to curb polluting emissions.

The panel agreed with the EU and Japan that parts of the program discriminate against foreign equipment suppliers, while remaining divided on whether the subsidies are illegal.

‘Ignore Ruling’

“My advice to the next premier of Ontario would be to ignore this ruling,” said John Bennett, executive director of Sierra Club Canada, an environmental organization. “We have to have the autonomy in our own country to develop technologies and industries to be to the best advantage of our own economy.”

Japan said it’s concerned other countries may follow suit and may appeal the illegal-subsidy issue.

“We want this to become a leading case so we can stop protectionism from spreading,” said Jun Kazeki, an official in charge of WTO issues at the Ministry of Economy, Trade and Industry.

The WTO ruling will probably hinder the development of renewable energy in Ontario and other jurisdictions that are developing similar programs, Bennett said. The government now has to determine what it can do to support and maintain momentum in its renewables industry, he said.

Copyright 2012 Bloomberg

Lead image: Gavel and book via Shutterstock

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