Sub-bituminous Subsidies and Lignite Litigation: American Coal, Canadian Electricity, and Potential WTO Challenges

Sammanfattning: The World Trade Organization’s Dispute Settlement Mechanism is exclusively focused on trade; however, there is a potential for it to be utilized to address environmental problems that are also trade distorting. One area where trade and environmental concerns overlap is fossil fuel subsidies. Fossil fuel subsidies support an incumbent energy regime against new renewable alternatives but also benefit domestic producers over foreign producers. Treating similar products differently based on where they are produced is against the rules of the World Trade Organization. In order to successfully challenge a subsidy under the World Trade Organization’s Agreement on Subsidies and Countervailing Measures, it is necessary for the injured party to produce a like product. An injured fossil fuel company would be the most conventional approach; however, using another fossil fuel as a like product would benefit that fossil fuel company, therefore, an effort was made to use electricity as a like good instead. The United States is an ideal case for examining this challenge as it is the third largest coal producer and the largest electricity importer in the world. As the vast majority of coal in the United States is used for electricity generation, if it is possible to show that the benefits of coal subsidies are passed-through to electricity producers, then electricity producers can be challenged on the grounds that their inputs are subsidized. Of the $4,003 million in American coal subsidies identified, it is likely that $736 violate World Trade Organization law with potentially another $1,505 million in violation as well. In order to file such a complaint, a country would need to be disadvantaged by these subsidies. When utilizing electricity as a like good, the only possible country is Canada, the second largest electricity exporter in the world.