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Ontario’s Green Energy Push Draws Fire From Japan, U.S. and E.U.

In the lull between United Nations climate talks in Tianjin, China, and Cancun, Mexico, another international body is hosting a cross-border dispute over energy and the environment: the World Trade Organization. That’s because in one Canadian province, clean energy is replacing coal, and some foreign governments say they’re entitled to a piece of the clean energy action.

Since Oct. 1, in Ontario four more coal units have been shuttered, and the world’s largest solar PV farm began production. It’s all part of the province’s aggressive plan to completely eliminate coal-fired power plants, which provide about 20 percent of its energy production, by 2014. Since the Liberal government of Ontario Premier Dalton McGuinty came into power in 2003, coal use in the province is down 70 percent, while 8,000 megawatts of cleaner electricity have been added, according to the province’s Ministry of Energy.

But countries that lead the world in clean-energy R&D, policy and manufacture aren’t exactly embracing these successes. Japan, the United States and the European Union say Ontario’s green energy policies violate international trade agreements because of local requirements, and they’ve taken their case to the Geneva-based body that handles such disputes.

On Sept. 16, Japan filed a formal complaint with the WTO against Canada over Ontario’s green energy policies. They “discriminate against equipment for renewable energy generation facilities produced outside Ontario, and also constitute a prohibited subsidy,” according to the official complaint.

On Sept. 28, the U.S. joined the complaint, and a day later the E.U. followed suit. Both cited a “significant trade interest” in the negotiations as developers and exporters of renewable energy technology.

Local Sourcing the Issue

The dispute revolves around Ontario’s 2009 Green Energy Act, which sets long-term clean energy goals and standards, and aims to develop a domestic market in renewable energy production. It includes a feed-in tariff (FIT), a guaranteed—and some say overly high—pricing structure for renewable energy from biomass to wind. Suppliers of that power must meet domestic content requirements (DCR) mandating that up to 60 percent of the goods and services used in renewable energy projects are sourced in Ontario.

Andrew Block, press secretary for the Ontario Ministry of Energy, said the Green Energy Act is consistent with Canada’s international trade agreements, a position publicly echoed by Prime Minister Stephen Harper, who has said the federal government will defend Ontario’s policies.

While he couldn’t cite specific numbers, Block said there have been significant investments by foreign players. “We have a good mix of domestic and international companies,” he said.

The biggest foreign investor is a coalition led by the Korean giant Samsung Group, which is pouring nearly $7 billion into the province to build four wind- and solar-power facilities that are expected to produce 2,500 megawatts of power (and 16,000 jobs) by 2016. The Ontario-based Canadian Solar, which operates PV manufacturing facilities in eight countries, has signed on to build one in Guelph that will begin production next year.

A Piece of the Action

Japan and its cosigners aren’t attempting to squelch Ontario’s nascent green energy economy, said Tim Weis, director of renewable energy and efficiency policy at the Calgary-based Pembina Institute, a nonprofit sustainable energy advisory group that advocated for the Green Energy Act.

“They just want a piece of it,” he said.

The attempt to gain fuller access to Ontario’s clean energy market “is good in that it shows just how much interest there is in renewable energy that countries are getting their back up,” added Weis.

If the WTO filing is any indication, the U.S.’s interest is intense: in its complaint, the U.S. notes its status as a “primary source of Canadian imports of products used in the production of renewable energy, including solar and wind energy.”

Yet quantifying the claim that the U.S. is “a primary source” is difficult. A spokeswoman for the Office of the U.S. Trade Representative, the agency that handles WTO complaints for the U.S., could not provide specific statistics for the assertion.

Part of the problem is that cleantech may fall into a number of export categories, says a representative from the International Trade Administration, a division of the U.S. Department of Commerce.

Both industry watchers and environmental groups agree there is little reliable data in this arena.

U.S . Behind in International Competition

Tim Greeff, political and policy director for Clean Economy Network, a U.S. cleantech advocacy group, argued that regardless of the outcome of the WTO complaint, the U.S. lacks the manufacturing capacity to compete with leading producers like Japan and China.

“It’s not like Canada’s going to turn around and buy from us,” Greeff said. “It’s a competitive marketplace. And we’re certainly not keeping up with gross dollars invested in this sector.”

According to a 2009 report by the Breakthrough Institute, a liberal think tank that promotes market solutions to energy issues, Japan, China and South Korea far outpace the U.S. in the manufacture and production of “virtually all” clean energy technologies. Over the next five years, public investment in cleantech by these governments is expected to outpace the U.S. government’s by 3 to 1.

“We’ve always been ahead on R&D,” Greeff said. “But you can’t get the jobs unless you have the manufacturing base. Other countries, such as Canada and China, are way ahead of the U.S. in recognizing the value of passing aggressive policies to create the local demand, to create local capacity and build early.”

Denmark, Greeff said, is one example of building early to create capacity and demand. In the 1970s the country passed laws promoting wind power. Today Denmark is one of the world’s leading wind technology exporters.

Germany is another. Since it adopted renewable energy legislation in 2000, Germany’s aggressive solar polices have drawn both domestic and international manufacturers. A decade later, the country is home to 47 percent of the world’s solar PV capacity, according to a recent report by research group Renewable Energy Policy Network.

That’s what Ontario is trying to do: stimulate the manufacturing sector to create jobs, said Weis. “There’s no secret there’s an industrial development element to the Act, which is why the DCR was put into the legislation,” he said.

When WTO negotiations will begin is unclear; such disputes often linger unresolved for years. Weis pointed to the long-standing fight between Canada and the U.S.—each the other’s largest trading partner—over the softwood lumber industry that began in 1982 and wasn’t resolved until 2006. The two countries are still battling over the timber.

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