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TWN Info Service on UN Sustainable Development (Feb17/12)
24 February 2017
Third World Network

US blocks panel request by India over renewable energy
Published in SUNS #8407 dated 22 February 2017

Geneva, 21 Feb (Kanaga Raja) - A request by India for the establishment of a dispute panel to examine some eleven measures adopted by various states and municipalities in the United States relating to the renewable energy sector was blocked by the US at a meeting of the WTO Dispute Settlement Body (DSB) on Monday. 

This was a first-time request and panel establishment will be automatic when the request comes up again before the DSB.

In other actions, the DSB agreed to establish a panel, at the second request of Turkey, to examine anti-dumping measures imposed by Morocco on imports of certain hot-rolled steel from Turkey.

The United States, the European Union, Singapore, the Russian Federation, China, Japan, India, Kazakhstan, Korea and Egypt reserved their third party rights to this dispute.

A panel request by Ukraine to examine measures imposed by the Russian Federation concerning traffic in transit was blocked by Russia.

This was a first-time request and panel establishment will be automatic when the request comes up again before the DSB.

In the complaint raised by India against the United States, a communication by India to the DSB said that on 9 September 2016, it had requested consultations with the US concerning certain measures of the US relating to subsidies granted and/or maintained contingent upon domestic content requirements in the renewable energy sector.

Consultations were held in Geneva on 16 and 17 November 2016, but they failed to resolve the dispute.

According to the Indian communication, the dispute arises from certain measures in the form of incentives which are granted and/or maintained contingent upon the use of domestic over imported goods in the renewable energy sector by various States of the US at the sub-federal level.

The measures cited in the Indian communication include:

1. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Renewable Energy Cost Recovery Incentive Payment Program (RECIP) in the State of Washington: The incentives are in the nature of investment cost recovery for each kilowatt-hour from a customer-generated electricity renewable energy system and payable to any individual, business, local governmental entity, not in the light and power business or in the gas distribution business, or a participant in a community solar project who applies to the light and power business serving the situs of the system for such incentive in terms of the relevant laws.

2. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Self- Generation Incentive Program (SGIP) in the State of California: The measures at issue are the additional financial incentives of 20% provided for installation of eligible distributed generation or Advanced Energy Storage technologies, identified in the SGIP Handbook 2016 (individually and/or collectively referred to as "the SGIP Equipment") from a "California Supplier" (i.e. any sole proprietorship, partnership, joint venture, corporation, or other business entity that manufactures eligible distributed generation technologies in California and that meets the criteria outlined in Section 3.1.1 of SGIP Handbook 2016).

3. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Los Angeles Department of Water and Power's (LADWP) Solar Incentive Program in the State of California: The measures at issue are the incentives provided in the form of the Los Angeles Manufacturing Credit (LAMC) for qualifying and approved photovoltaic (PV) equipment manufactured in Los Angeles (individually and/or collectively referred to as "the PV Equipment") that has confirmed LADWP Solar Incentive Program reservation.

4. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Montana Tax Incentive for Ethanol Production (TIEP) in the State of Montana: The measures at issue are tax incentives provided to ethanol distributors for distilling alcohol, if the ethanol is produced in Montana from Montana agricultural products, including Montana wood or wood products (individually and/or collectively referred to as "the Ethanol Products").

5. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Montana Tax Credit for Biodiesel Blending and Storage in the State of Montana: The measures at issue are tax credits available for any individual and/or juridical entity for biodiesel blending and storage in respect of the costs of investment in depreciable property used for storing or blending biodiesel made entirely from Montana-produced feedstock (individually and/or collectively referred to as "the Biodiesel Products"), with petroleum diesel for sale.

6. Incentives granted and/or maintained contingent upon the use of domestic over imported goods through refund for Taxes paid on Biodiesel by Distributor or Retailer in the State of Montana: The measures at issue are the refunds of the special fuel tax on biodiesel permissible for licensed distributors who use biodiesel made entirely from ingredients produced in Montana (individually and/or collectively referred to as "the Biodiesel Ingredients"). Additionally, the owner or operator of a retail motor fuel outlet may claim a refund on biodiesel on which the special fuel tax has been paid and that is purchased from a licensed distributor if the biodiesel is made entirely from biodiesel ingredients produced in the State of Montana.

7. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Connecticut Residential Solar Investment Program (CRSIP) in the State of Connecticut: The measures at issue are the provision of incentives of up to five per cent of "the then-applicable incentive" provided under the relevant instrument for the use of major system components manufactured or assembled in Connecticut. Further, another additional incentive of up to five per cent of "the then-applicable incentive" is provided for the use of major system components manufactured or assembled in a "distressed municipality" or "a targeted investment community" (individually and/or collectively referred to as "the Connecticut System Components").

8. Incentives granted and/or maintained contingent upon the use of domestic over imported goods through the Renewable Energy Credits in the State of Michigan: The measures at issue are the renewable energy credits offered for each megawatt hour of electricity generated from a renewable energy system constructed using equipment made in the State of Michigan. Further, renewable energy credits are also offered for each megawatt hour of electricity generated from a renewable energy system constructed using a workforce composed of residents of the State of Michigan (individually and/or collectively referred to as "the Renewable Energy System and Equipment"). The renewable energy credits may be traded, sold or otherwise transferred.

9. Incentives granted and/or maintained contingent upon the use of domestic over imported goods through the Delaware Solar Renewable Energy Credits in the State of Delaware: The measures at issue are that a retail electricity supplier is eligible to receive an additional 10% credit toward meeting the renewable energy portfolio standards established for solar or wind energy installations sited in Delaware provided that a minimum of 50% of the cost of renewable energy equipment, inclusive of mounting components, are manufactured in Delaware (individually and/or collectively referred to as "the Renewable Energy Equipment and Mounting Components"). Further, a retail electricity supplier is eligible to receive an additional 10% credit toward meeting the renewable energy portfolio standards for solar or wind energy installations sited in Delaware provided that the facility is constructed and/or installed with a minimum of 75% in-state workforce. The renewable energy credits are tradable instruments.

10. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Made in Minnesota Solar Incentive Program (MSIP) in the State of Minnesota: The measures at issue are the: (i) incentives (which are in the nature of performance-based financial incentive expressed as a per kilowatt-hour amount) offered if the solar photovoltaic modules qualify as "Made in Minnesota"; (ii) rebates offered to owners of a qualified property for installing solar photovoltaic modules manufactured in Minnesota; and (iii) rebates offered for the installation of "Made in Minnesota" solar thermal systems.

11. Incentives granted and/or maintained contingent upon the use of domestic over imported goods under Massachusetts Clean Energy Centre's Commonwealth Solar Hot Water Program (CSHWP) in the State of Massachusetts: The program is administered by the Massachusetts Clean Energy Centre which provides certain rebates to reduce the upfront cost of installing a solar hot water system. The measures at issue are rebates available for both residential-scale and commercial-scale projects if the installed system has eligible Massachusetts manufactured components (individually and/or collectively referred to as "the Installed System and Massachusetts Components").

In its statement at the DSB, India said that the United States maintains certain renewable energy programmes which promote domestic content requirements (DCR) through incentives.

It noted that in the past, it had made sincere efforts to understand the nature of some of these programmes through clarificatory questions before the TRIMs (Trade-Related Investment Measures) and the SCM (Subsidies and Countervailing Measures) Committees.

These efforts did not yield satisfactory responses, it said.

Subsequently, India said that it requested consultations with the United States on 9 September 2016, and that consultations were held on 16-17 November 2016, which unfortunately, failed to resolve the issues.

India said that it is mindful that climate change is a real threat and the global community must take all necessary steps to protect our planet for the future generations. In this regard, constructive efforts made by the global community have been commendable so far.

Past experience shows that for the purpose of long-run energy security, there is need for in-house capacity development for manufacturing of equipment for generation of renewable energy at least to some extent to avoid any international crisis, it said.

Hence, India believes that every country needs to have policy space for it to build such manufacturing capacity within its own territory.

"However, Members will have to be also mindful of our obligations under the WTO," it pointed out.

India believes that certain renewable energy programmes maintained by the United States which are the subject matter of the present panel request, fall short of the same and are not consistent with the WTO rules on non-discrimination as well as subsidies.

India said that it has identified eleven renewable energy programmes in its panel request which form the basis of the present dispute.

According to India, each of these programmes offers certain subsidies to targeted recipients which appear to be conditioned upon the use of local content in the production process of the concerned goods.

Members are aware that subsidies which are contingent on local content requirements have trade distortionary effects and are not only prohibited under the WTO Agreement on Subsidies and Countervailing Measures but are also inconsistent with Article III of GATT 1994 as well as Article 2.1 of the TRIMs Agreement.

Therefore, India said that it is concerned with these identified programmes, which negate the benefits to WTO Members.

In its statement at the DSB, the United States said that it is disappointed that India has sought the establishment of a panel in this matter.

"It appears that India launched this dispute for purely political reasons," the US claimed.

According to the US, Indian government officials have been quoted as characterising this dispute as motivated by the DSB's findings in DS456 that the domestic content requirements under India's National Solar Mission are contrary to WTO rules, a complaint brought by the United States.

It said Article 3.10 of the DSU makes clear that the "use of the dispute settlement" mechanism should be made "in good faith" and that "complaints and counter-complaints [...] [in distinct matters] should not be linked."

The US maintained that India does not export significant amounts of renewable energy equipment to the United States, and the state-level programs identified in India's request would appear to have virtually no effect on commerce.

"At a time when WTO dispute settlement resources are stretched thin, we regret that India would seek to use WTO resources on such a matter."

For these reasons, the US said that it does not agree to the establishment of a panel today.

 


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