Legal Implications of Canada-Renewable Energy Dispute for the Feed-in Tariff Program in Korea

Abstract

With the Paris Agreement entering into force on 4 November 2016, all the contracting parties, from developed to developing countries, share common but differentiated responsibilities to respond to the urgent threat of climate change. The Paris Agreement may have limitations in that some obligations, such as those regarding the amount of greenhouse gas (GHG) emission reductions and financial support, are not legally binding and international laws are generally regarded as less coercive than domestic laws. Nevertheless, the member countries agreed to enhance the implementation of the United Nations Framework Convention on Climate Change (UNFCCC) and implement more specific and aggressive action plans including the submission of Nationally Determined Contributions (NDCs), periodic global stocktaking, and further details about the Paris Agreement will continue being discussed in the Conference of the Parties (COP), which will result in considerable changes to individual countries economic, energy, and industrial policies. In particular, the likely reduction of the use of fossil fuel energy, which is one of the main causes of GHG emissions, spurs each country to develop and apply renewable energy technologies for energy security, a response to climate change, and a new growth engine for sustainable development. The renewable energy industry is one of the main industries that need huge upfront costs to be established. Additionally, it is one of the means of resolving the negative externality caused by the use of fossil fuels and providing the positive externality of creating new technologies, which needs governmental support to develop technologies and promote extensive diffusion. In other words, subsidies from the government could be inevitable to nurture the industry. However, they can be filed to the World Trade Organization (WTO) when such support is provided to domestic companies that are competing with those of other trading partners. In addition, the current global economic recession can easily entice individual countries to use subsidies to protect their domestic industries, so each country pays close attention to their trading partners subsidy policies. Needless to say, WTO agreements including the Agreement on Subsidies and Countervailing Measures (SCM Agreement) were introduced to regulate the illegal subsidies disrupting international trade. Meanwhile, the agreements themselves and some Dispute Settlement Body (DSB) rulings have confirmed that the agreements are also grounded in the recognition that they might not be unreasonable obstacles for government assistance to help develop their own economy. This may mean that a legitimate subsidy policy in compliance with WTO agreements can be operated. This kind of approach leaves room to simultaneously achieve two significant objectives in international societies: coping with climate change and promoting free trade in a fair-trade environment through the harmonization of the UNFCCC regime and the WTO regime. The UNFCCC regime encourages each government to aggressively intervene in the market to fix the market failure in the climate change field. In contrast, the WTO regime has been against most government interventions to promote freer trade. This paper examines the historical background for determining potential conflicts of the two regimes and reviews the actual disputes. In particular, the Canada–Renewable Energy dispute is scrutinized to find a way for the Feed-in Tariff (FIT) Program in Korea, one of the major policies for renewable energy dissemination, to be consistent with WTO agreements, including the SCM Agreement, Agreement on Trade-Related Investment Measures (TRIMs Agreement), and General Agreement on Tariffs and Trade 1994 (GATT 1994). Renewable energy dissemination policy is a new engine for the promotion of sustainable development as well as a means with which to cope with climate change

it will present a way to continue promoting stable economic development without creating international disputes, while faithfully fulfilling the obligations of GHG emission reductions if renewable energy dissemination policy is implemented in compliance with WTO agreements. Hopefully, the efforts in the paper will determine a way for the FIT program to be reasonably implemented in accordance with WTO agreements in the short run and, at the same time, help to reconcile the New Climate regime with the WTO regime in the long run.