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Securing Policy Space for Clean Energy under the SCM Agreement: Alternative Approaches

December 2013
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The case for policy space for clean energy policies has to be made in terms of the political- and other challenges of adopting ideal or optimal policies to ensure that the relative pricing of clean and dirty energy reflects climate and other environmental externalities. It is unlikely that a consensus could be found among World Trade Organization (WTO) Members to carve out clean-energy policies from Subsidies and Countervailing Measures (SCM) disciplines. This paper suggests alternatives that do not require formal amendment of the SCM Agreement.

The focus on agreement on the interpretation and application of the SCM Agreement rather than its amendment arises, at least in part, from the open-ended nature of the key concepts for determining whether subsidies are susceptible to challenge under the SCM Agreement, or susceptible to WTO legal trade remedy action. Since it is extremely difficult to obtain agreement on amending existing WTO treaties, especially outside a trade round, conceiving, at least in the short and medium term, the adjustment of the SCM Agreement through an interpretive understanding rather than an amendment makes sense. An alternative, or perhaps even a complement, to an interpretive understanding could be a waiver for existing clean-energy policies pursuant to Article IX (3) of the WTO Agreement.

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