The European Union has joined Japan in complaining to the World Trade Organization about Ontario’s subsidies for green energy projects in the province.
The EU’s concerns are very similar to those expressed in Japan’s WTO complaint filed last September: that the provisions in Ontario’s Green Energy Act, which pay high prices for renewable power generated with equipment built in the province, provide unfair subsidies to local suppliers.
The EU said Ontario’s law, which came into effect in 2009, breaches WTO rules that prohibit links between subsidies and the use of domestic products.
In Ontario, project developers who qualify for relatively high power prices under its so-called “feed-in tariff” must buy as much as 60 per cent of their equipment from local suppliers.
The new complaint says European exports to Canada of wind and solar equipment would be higher if the local-content requirements were removed.
“The addition of the EU as a complaining party reinforces the bench strength of the opposition [to Ontario’s law]” said Lawrence Herman, international trade counsel at Toronto law firm Cassels Brock & Blackwell. However, he added, “it doesn’t necessarily mean that the legal arguments are any stronger.”
Complaints at the WTO are lodged against countries rather than provinces, so the European filing is against Canada, not Ontario. A spokeswoman for the Department of Foreign Affairs and International Trade said the government will “defend Canada's interests during these proceedings, as per our standard practice.”
Japan’s complaint is on its way to a panel of judges, while Europe’s concerns must first be aired in direct talks with Ottawa.
Ontario Energy Minister Brad Duguid reiterated what he said when Japan filed its complaint, that “it is our view that the Ontario feed-in-tariff program is in compliance with Canada’s obligations under the World Trade Organization.”
Ontario’s policies are getting attention from around the world because they are creating thousands of jobs, Mr. Duguid said. “We’re now seen as the world leader and when you’re in that position, you’re going to have other jurisdictions looking somewhat enviously at what’s being achieved here.”
Ontario’s renewable energy policies have become a key issue in the provincial election set for this fall. Opposition Leader Tim Hudak has said he will dismantle parts of the Green Energy Act if he becomes premier.
Mr. Herman said the uncertainty caused by the European and Japanese complaints “are not helpful to the investment climate” surrounding renewable energy development in Ontario. Some companies have already said they are reconsidering plans because of Mr. Hudak’s promises.
A key wild card, Mr. Herman said, is what approach the United States will take to the WTO complaints. The U.S. might support Canada because a number of states have similar green energy program, but its position is not yet known, he said.