Ontario’s FIT program ruled illegal by World Trade Organization

The World Trade Organization has ruled against Ontario and upheld complaints of protectionism from the European Union and Japan, who claim that aspects of Ontario’s green energy program violate international trade rules and discriminate against foreign firms.

The Ontario Green Energy Act specifies that a certain percentage, up to 60 per cent, of the components in solar and wind power projects for the Feed-in Tariff (FIT) program must be manufactured in Ontario.

The WTO ruled that Ontario’s Feed-in Tariff program was a form of illegal subsidy, and that the local content requirements of the Green Energy Act were discriminatory and protectionist.

Last December, a WTO panel found that this local content requirement violated international trade rules. Ottawa challenged the panel’s ruling, at which time the EU and Japan each filed counter appeals.

A major point of contention was whether Ontario’s local content requirement could be construed as falling under the government procurement exemption. This provision of the General Agreement on Tariffs and Trade (GATT) allows governments to set local content requirements when the goods and services being procured are for government use exclusively. The WTO panel ruled that in Ontario’s case, the procurements were not for government use but for commercial resale. In spite of Canada’s argument that Ontario did not intend to profit from the resale, the panel found that the exemption did not apply.

Japan had also argued that Ontario’s FIT program conferred a benefit on local content providers, in effect an illegal subsidy, under WTO rules. Renewable energy companies can only qualify for FIT payments, which are considerably higher than the rates Ontario Power Generation charges its customers for electricity, if they source the bulk of their components and services in Ontario. The purpose of the higher rates was to give private businesses and communities an incentive to invest in renewable energy.

An EU trade spokesman said that today’s ruling makes clear that the “use of quality, cost-effective technologies should not be hampered by protectionist measures.”

Ontario’s energy minister Bob Chiarelli told CBC news that notwithstanding the WTO ruling, the province was not going to abandon its commitment to green energy. The green energy sector, he said, has already created over 31,000 jobs and leveraged billions of dollars in investment. The province is consulting with the federal government and deciding what to do next.

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