Ontario green policy under attack

Energy trade liberalization reduces tariffs and local content rules to scale renewable energy, cut costs, and accelerate clean tech. It advances free trade under the WTO, Doha talks, and combats energy poverty and climate change.

Protectionist energy policies like Ontario's Green Energy Act came under attack from global industry and trade officials, who said restrictive rules increase the cost of renewable energy.

Just days after Japan's WTO challenge to Ontario's legislation at the World Trade Organization, WTO director-general Pascal Lamy urged governments to liberalize energy trade and limit the use of tariff barriers and preferential procurement rules.

"We all would agree barriers to trade in these areas do penalize the planet," Mr. Lamy told a gathering of senior energy executives and government officials.

He said protectionism in the sector drives up costs, which slows adoption of green technology and perpetuates "energy poverty" in the world, where 1.5 billion people do not have access to commercial energy sources.

In a report submitted to the WTO, the World Energy Council urged governments to eliminate tariffs on a long list of energy technologies, including turbines and solar panels, and to reduce non-tariff barriers.

Energy executives warned that preferential policies result in higher costs and, amid growing doubts about Ontario's plan from key partners, will impede commercialization of renewable energy and other clean technologies needed to combat climate change.

Such barriers "are a major concern and are going to lead to higher costs for consumers and will slow deployment of green technology," said John Krenicki, vice-chairman of General Electric Co., one of the world's largest providers of energy equipment.

"We need scale to bring down costs and lower future energy costs across markets, and free trade is critical to achieving scale."

The centrepiece of Ontario's energy model is the subsidy plan that pays premium prices for power from wind, solar, small hydro and biomass. However, developers must procure a certain percentage of the required goods and services within the province.

South Korea-based Samsung Electronics Co. Ltd. has signed a $7-billion deal with the province to build four factories for wind and solar equipment, and provide up to 2,500 megawatts of premium-priced power.

Mr. Krenicki said some 30 U.S. states now have programs to require their utilities to purchase renewable power - and many of those have local preference policies. But he said the industry will never be competitive if each jurisdiction requires companies to build local manufacturing plants.

Trade lawyers say it will be difficult for Japan to win its WTO case, because the international trade agreements provide exemptions for government procurement and may not bind sub-national governments, despite growing U.S. and EU pushback on Ontario's plan.

Quebec and other provinces also have local procurement rules under their various renewable energy plans.

But Ottawa is currently negotiating a comprehensive trade agreement with the European Union, and the Europeans are taking aim at provincial procurement policies in energy and other sectors.

GE executive Timothy Richards - who chaired the council's committee on trade - said the group is urging governments to commit to liberalizing their energy markets under the WTO's Doha round of negotiations.

But those talks have bogged down and the committee is urging industrialized nations to move separately on energy trade in goods and services.

"When industry is doing everything it can to wring costs out of the renewables, and governments want to see more renewables deployed, why at the same time are we seeing governments impose additional charges on the products that move across borders?" Mr. Richards asked in an interview.

He said he didn't want to single out specific jurisdictions.

Governments typically defend the additional costs of renewable power and other clean tech by pointing to the local job creation that such investments produce.

In an interview on the sidelines of the conference, Ontario Energy Minister Brad Duguid praised the province's Green Energy Act, saying it will create a manufacturing hub for the clean sector.

He said the legislation will result in some 35,000 direct and indirect jobs in the sector.

"We're not surprised that other countries and jurisdictions have taken notice that Ontario has become a global leader in building renewable energy and developing projects and attracting investment," he said. "We want to make Ontario a global destination of renewable energy development, expertise and manufacturing."

The Ontario minister said the policy is consistent with Canada's obligations under the World Trade Organization. He said Ontario's success at attracting investment will help spur the development of the industry worldwide.

He added Ontario's appetite for renewable energy is creating opportunity for suppliers from outside the province, since only a portion of the procurement must be done locally.

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