Ain't Wastin' Time No More: Subsidies for Renewable Energy, The SCM Agreement, Policy Space, and Law Reform

Assuming that certain subsidies to support renewable energy may be ‘good’, the central question of this article is whether World Trade Organization (WTO) subsidy disciplines recognize this and offer appropriate policy space to Members. The analysis reveals that the situation is one of diffuse legal uncertainty, if not outright conflict between policy prescriptions and trade law requirements. The argument of the article is that the uncertainty of the legal assessment in itself produces a constraint on policy space. Some issues may be clarified through litigation but this is not the optimal approach since disputes are subject to many vagaries and may offer, at best, piece-meal and partial solutions. The pressure put on the judiciary should also not be underestimated. The analysis of the credible but controversial possibility of resorting to GATT Article XX to justify certain subsidies is the best example in point. The unsatisfactory nature of the legal framework is not merely hypothetical since subsidies for renewable energy are increasingly subject to disputes at both WTO and national levels. Against this scenario of inadequate legal framework and increasing litigiousness, law reform emerges as the first-best alternative. It is claimed that what is needed is a legal shelter that, in a clear and positive way, defines what types of subsidies supporting renewable energy are legitimate and permitted.