Download International mechanisms for addressing energy subsidies

An Overview of International
Mechanisms for Addressing
Energy Subsidies
Nathalie Bernasconi-Osterwalder
Center for International Environmental Law
International mechanisms
for addressing energy
subsidies

Two main instruments
– UNFCCC and Kyoto Protocol
– WTO (GATT, SCM Agreement, AoA)

Other instruments
– Human Rights and Climate change
– International Environmental Law
Principles (Polluter Pays Principle)
– WSSD Plan of Implementation
Identifying climate change
as a threat to human rights

Mary Robinson (former UN high commissioner for human rights) on
climate change and human rights:
"The impact of climate change is immediately to affect human rights
- the right to food, the right to safe water and education … “

For example: Impact of global warming on the Inuit and other
vulnerable communities in the Americas – Hearing before the InterAmerican Commission on Human Rights:
–
–
–
–

The
The
The
The
rights of indigenous peoples
right to use and enjoy property without undue interference
rights to life, physical integrity and security
right of peoples to enjoy the benefits of culture
For example: The Alliance of Small Island States (AOSIS) working on
a declaration that climate change threatens the fundamental right to
a safe, secure and sustainable environment.
Climate Change and
general Int’l Envt’l Law
Trail Smelter case and the Polluter Pays Principle



Dispute between Canada and the United States in the 1930s
regarding transboundary pollution from iron and zinc smelter
in Canada.
Established the "polluter pays" principle as the basis for
resolving transboundary environmental disputes.
"no state has the right to use or permit the use of its territory
in such a manner as to cause injury by fumes in or to the
territory of another or the properties or persons therein, when
the cause is of serious consequence and the injury is
established by clear and convincing evidence.“
WSSD Plan of
Implementation
III. Changing unsustainable patterns of consumption and
production
20. (p) Policies to reduce market distortions would promote energy
systems compatible with sustainable development through the use of
improved market signals and by removing market distortions,
including restructuring taxation and phasing out harmful subsidies,
where they exis t, to reflect their environmental impacts, with such
policies taking fully into account the specific needs and conditions of
developing countries, with the aim of minimizing the possible
adverse impacts on their development;
(q) Take action, where appropriate, to phase out subsidies in
this area that inhibit sustainable development, taking fully into
account the specific conditions and different levels of development of
individual countries and considering their adverse effect, particularly
on developing countries;
1992 UNFCCC



Adopted as the basis for a global response
to the global problem of climate change.
192 Parties - near-universal membership.
Ultimate objective of the Convention: to
stabilize greenhouse gas concentrations in
the atmosphere at a level that will prevent
dangerous human interference with the
climate system.
UNFCCC sets an overall
framework for tackling
climate change

The Parties to the Convention agreed to:
– Develop and periodically submit national reports
containing information on the GHG emissions and
describing the steps taken and plans to implement.
– Put in place national strategies to control emissions and to
adapt to the impacts of climate change.
– Promote the development and use of climate-friendly
technologies and the sustainable management of forests
and other ecosystems.
– Apply the Principle of Common but Differentiated
Responsibilities.
1997 Kyoto Protocol to
the UNFCCC



176 Parties.
36 industrialized countries and the European
Community committed to reducing their
emissions by an average of 5 percent by
2012 against 1990 levels.
Protocol allows them to meet their emission
reduction commitments abroad through socalled ”market-based mechanisms”.
Six greenhouse gases
covered by the Kyoto
Protocol
Global emissions in 2004:
1. Carbon dioxide (CO2): the consumption of energy from burning
fossil fuels, deforestation: 76,7% (with 56.6% from fossil fuel use)
2. Methane (CH4): agricultural activities, energy production, waste:
14.3%
3. Nitrous oxide (N2O): mainly from agricultural activities: 7.9%
*4. Hydrofluorocarbons (HFCs): used as replacements for ozonedepleting substances
*5. Perfluorocarbons (PFCs): used as replacements for ozonedepleting substances: used as replacements for ozone-depleting
substances
*6. Sulphur hexafluoride (SF6): used in some industrial processes
and in electric equipment
(*1.1%)
Source: UNFCCC
Kyoto Protocol: Emissions
reduction commitments



Sets emissions reduction targets and
timetables for Industrialized Countries.
Does not mandate specific policies to
achieve targets.
Provides a non-exhaustive list of
policies and measures.
Article 2(1)(a)
Kyoto Protocol
1. Each Party included in Annex I, in achieving its quantified emission limitation and reduction commitments under Article 3, in
order to promote sustainable development, shall:
(a)
Implement and/or further elaborate policies and measures in accordance with its national circumstances,
such as:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Enhancement of energy efficiency in relevant sectors of the national economy;
Protection and enhancement of sinks and reservoirs of greenhouse gases not controlled by the
Montreal Protocol, taking into account its commitments under relevant international environmental
agreements; promotion of sustainable forest management practices, afforestation
and reforestation;
Promotion of sustainable forms of agriculture in light of climate change considerations;
Research on, and promotion, development and increased use of, new and renewable forms of
energy, of carbon dioxide sequestration technologies and of advanced and innovative
environmentally sound technologies;
Progressive reduction or phasing out of market imperfections, fiscal incentives, tax and
duty exemptions and subsidies in all greenhouse gas emitting sectors that run counter
to the objective of the Convention and application of market instruments;
Encouragement of appropriate reforms in relevant sectors aimed at promoting policies and
measures which limit or reduce emissions of greenhouse gases not controlled by the Montreal
Protocol;
Measures to limit and/or reduce emissions of greenhouse gases not controlled by the Montreal
Protocol in the transport sector;
Limitation and/or reduction of methane emissions through recovery and use in waste
management, as well as in the production, transport and distribution of energy; …
Article 2(1)(a)(v)
Kyoto Protocol
In achieving reduction commitments parties
are to adopt or elaborate policies, such as:
…
 (v) Progressive reduction or phasing out of
market imperfections, fiscal incentives, tax
and duty exemptions and subsidies in all
greenhouse gas emitting sectors that run
counter to the objective of the
Convention and application of market
instruments …
Energy Subsidies
and the WTO


WTO Subsidies Disciplines apply to all
“subsidies”, including energy.
Applicable agreements are:
– General Agreement on Tariffs and Trade (GATT)
– Agreement on Subsidies and Countervailing
Measures (SCM Agreement)

Additional agreement applicable to biofuels:
– Agreement on Agriculture (AoA)
SCM Agreement


Disciplines the use of subsidies
Regulates the actions countries can take to
counter the effects of subsidies.
- a member can use the WTO’s dispute
settlement procedure to seek the withdrawal of
the subsidy or the removal of its adverse effects;
Or
- a member can launch its own investigation and
ultimately charge extra duty (known as
“countervailing duty”) on subsidized imports that
are found to be hurting domestic producers.
Definition of a subsidy
Article 1 of the ASCM
A subsidy exists whenever:
•
a financial contribution is made
•
by a government or any public body
within the territory of a member
•
which confers a benefit.
Specificity Requirement
(Article 1.2 and 2 SCM)

Only a measure that is a “specific subsidy” as
defined in Part I of the ASCM is subject to WTO’s
subsidies disciplines and can be subject to
countervailing measures.
– Enterprise-specificity
– Industry-specificity
– Regional specificity

Prohibited subsidies (Article 3 ASCM) are also
deemed specific:
– Export subsidies
– Local content subsidies
Categories of Subsidies


Prohibited Subsidies (Article 3 ASCM)
Actionable Subsidies: the complaining
country has to show that the subsidy has
an adverse effect on its interests.
Otherwise the subsidy is permitted.
Actionable Subsidies:
Three types of
adverse effects



Injury to a domestic industry caused by
subsidized imports in the territory of the
complaining member.
Serious prejudice in the market of the subsidizing
member or in a third country market.
Nullification or impairment of benefits accruing
under the GATT 1994.
(Damage to a country’s benefits and
expectations from its WTO membership through
another country’s change in its trade regime or
failure to carry out its WTO obligations.)
Article 25 ASCM:
Notification Requirements



Requires that Members notify any subsidy
(as defined in the ASCM) which is “specific.”
Content should include: form; amounts;
objectives; duration; and “statistical data
permitting an assessment of the trade
effects of a subsidy.”
While Article 25 is binding, it is aimed at
transparency and carries no legal effect with
respect to the information provided.
We need data!

Why?
– Transparency!
– To monitor commitments under international instruments
– As a basis for challenges under the ASCM, HRs and other
processes
– As a basis for future negotiations on the reduction and
elimination of energy subsidies

Where/how should data be collected?
– UNFCCC
– WTO
– Other?
What process for addressing
energy subsidies?

Existing WTO Framework
– Is it sufficient/adequate?
– Using dispute settlement



New WTO process (like fisheries)
UNFCCC
Other?