Aug. 11 (Bloomberg) -- The European Union lodged a complaint at the World Trade Organization against Canada over subsidies the province of Ontario gives to renewable-energy producers that use domestic technology.
Under Ontario’s feed-in tariff program, created by the province’s Green Energy Act, above-market rates are paid to producers of renewable energy provided it is generated with a certain percentage of Canadian-made equipment. The act aims to help Ontario meet its goal of shutting all its coal-power generators by 2014.
A provision of the program that began in October 2009 requires projects to use goods and labor from Ontario for as much as 60 percent of supply costs, depending on the type of renewable-energy source.
“This is in clear breach of the WTO rules that prohibit linking subsidies to the use of domestic products,” the European Commission said today in an e-mailed statement from Brussels. The Ontario Power Authority “has set conditions that favor domestic products and services.”
Under the program, 40 percent to 50 percent of the initial costs to develop a solar-energy project must be made of up products or services from Ontario, rising to 60 percent for projects developed after 2011, the commission said. For wind energy, the rates amount to 25 percent for initial costs and rise to 50 percent for projects developed after 2012, it said.
Today’s request for consultations is the first step in the case and follows a similar complaint Japan lodged last year on Sept. 13. Under WTO rules, the EU and Canada must now hold talks for at least two months in a bid to resolve the dispute. If the talks fail, the EU can ask WTO judges to rule.
EU exports to Canada in wind power and photovoltaic power-generation equipment are “significant,” according to the commission, ranging from 300 million euros ($426 million) to 600 million between 2007 and 2009.
“These figures could be higher should the local-content requirements be removed from the legislation in question,” the commission said. “The EU is also increasingly concerned by such measures taken by other trading partners.”
The complaints stoke a broader debate over plans by countries including Canada, the U.S. and China to reserve public works as well as energy and environmental projects worth billions of dollars for local companies. Japan has said it is “seriously concerned about a proliferation of such protectionist measures all over the world.” The WTO agreed on July 20 to set up a panel of judges to probe Japan’s complaint against Canada.
Caitlin Workman, a spokeswoman for Canada’s Trade Department in Ottawa, said her government will “vigorously defend Canada’s interests during these proceedings” at the WTO.
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