Disciplining Clean Energy Subsidies to Speed the Transition to a Low-Carbon World

Abstract

The purpose of multilateral disciplines on subsidies is to avoid trade distortions, in order to increase production efficiencies through competition. However, this objective may be defeated due to defects in the structure of the WTO Agreement on Subsidies and Countervailing Measures and the resulting interpretations of WTO tribunals in cases involving clean energy subsidies. These defects, together with inefficient design of energy markets, could slow the transition to clean energy sources. However, the necessary reforms to the multilateral subsidies regime and energy markets are unlikely to be implemented any time soon, in the absence of a successful formula for multilateral negotiations. In this environment, the private sector will have to take the lead in making the transition to clean energy sources, in order to mitigate the disastrous effects of climate change to the extent that this goal remains attainable.