Over the past few years the World Trade Organization (WTO) has been called upon to investigate cases of domestic content rules (DCR, also known as local content rules or LCR) in renewable energy policy. In a more recent case, Ontario was accused of violating trade law by requiring renewable energy developers to purchase a designated amount of locally sourced materials for projects as part of its feed-in tariff (FIT) program. In December 2012, the WTO found these practices to be illegal and upheld its ruling in May after an appeal was issued. Meanwhile, many countries still incorporate similar rules in their incentive programs.
Renewable Energy World asked industry executives to share their thoughts and insights on this controversial question:
Do domestic content rules, those that require projects to use a certain amount of services or material that is produced locally, help or hurt the renewable energy industry?
We encourage you to lend your own voice to the discussion in the comments below.
Steve Sawyer, Secretary-General, Global Wind Energy Council
The latest ruling by the WTO on the Ontario FIT is welcomed by the wind industry. In 2012, wind energy grew by nearly 20 percent in Canada, driving over €1.49 billion ($1.95 billion) in investment and creating over 10,500 person-years of employment. The wind industry in Canada installed 936 MW in 2012, bringing total installed capacity to 6.2 GW by the end of the year. We expect a market in the vicinity of 1.5 GW for 2013 and in that same range for the next few years, as Canada seems well on track towards the industry target of 12 GW by 2016. Ontario remains by far the largest provincial market, followed by Quebec and Alberta.
Legal recourse to national practices that distort trade is time-consuming and introduces significant uncertainty for clean energy investors and manufacturers. In the past decade, we have seen a number of countries use policy mechanisms that include LCR provisions to promote green industry.
Current over-capacity in wind turbine manufacturing means that fulfillment of LCRs merely exacerbates an already severe problem. Ideally, we would like unfettered trade in renewable technologies, but we're a long way from that. But perhaps a middle ground could be found.
The LCR approach for promoting domestic production and employment opportunities can be brought about by a positive incentive scheme, perhaps incentivizing manufacturing tax credits, or an adder on top of the FIT for locally sourced components. But in the interim, the top-down enforcement of LCR is likely to do more harm than good for both the local and the international wind industry and our outlook for a sustainable clean energy future.
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