Info Service on UN Sustainable Development (Sept16/02)
14 September 2016
Third World Network
India raises dispute against US on solar panel programmes
Published in SUNS #8311 dated 14 September 2016
Geneva, 13 Sep (D. Ravi Kanth) - India has taken the plunge finally,
and raised a dispute against the United States at the World Trade
Organization on 9 September over domestic content requirements and
subsidies provided by eight American states -- Washington, California,
Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota
-- for renewable energy companies in violation of national treatment
and other provisions, according to a complaint filed by India.
After dithering for over three years despite conclusive evidence against
several incentive programs offered by several states in the US, to
promote and develop the renewable energy sector in violation of core
WTO rules, India launched dispute settlement proceedings against the
US on 9 September, and has asked the US to enter into Article 4 consultations
under the Dispute Settlement Understanding.
As a first step, the US must provide concrete responses to the issues
raised in the Indian complaint within 30 days. India can call for
the establishment of a dispute settlement panel to adjudicate over
the allegedly inconsistent practices adopted by the eight states if
the two sides fail to amicably resolve the issues raised in the Indian
Although India's full compliant against the incentive programs provided
by the eight states is not public yet, New Delhi had already raised
concern over the incentives contingent upon the use of domestic or
state specific products that are incompatible with the obligations
of the US under Article 2 of the TRIMs Agreement read with Article
III:4 of GATT 1994.
Article 2 of the TRIMs Agreement provides that "no member shall
apply any TRIM that is inconsistent with the provisions of Article
III of GATT 1994," while GATT Article III:4 calls for treatment
to imported products "no less favourable" than that accorded
to "like products of national origin in respect of all laws,
regulations and requirements affecting their internal sale, offering
for sale, purchase, transportation, distribution or use."
India had raised concerns about "Michigan: Renewable Energy Credits
under the Clean, Renewable, and Efficient Energy Act (Public Act 295)";
"California: Los Angeles Department of Water and Power (LADWP)
- Solar Photovoltaic Incentive Program"; "California: Self
Generation Incentive Program (SGIP)"; "Delaware: Solar Energy
Credits"; "Minnesota: Xcel Energy - Solar Rewards Program
and MN Made PV Rebate Program"; "Massachusetts: Commonwealth
Solar II Photovoltaic Rebate Program"; and "Connecticut:
S.109 of The Public Act No. 11-80 Read With The Residential Solar
Investment Program" among others.
In these programs the US states offer renewable energy credits for
each megawatt hour of electricity generated from a renewable energy
system constructed using equipment made in the states listed in India's
complaint. Further, they require using workforce composed of residents
from the states mentioned by India.
In the California solar incentive program, for example, it was prescribed
that photovoltaic modules and solar power equipment must be manufactured
within the limits of the City of Los Angles.
India also raised several subsidy programs offered by these states
to promote renewable energy. India had argued that "some of these
subsidy programs have provisions relating to local or domestic content
requirements" which are inconsistent with Article 3.2 read with
Article 3.1(b) of the Agreement on Subsidies and Countervailing Measures.
India challenged Delaware's solar renewable energy credits on grounds
that it offers multiple credits for specific energy source.
Significantly, the US resorted to an identical trade dispute against
India's national solar mission and the local content requirements.
India had imposed certain local content requirements under the Jawaharlal
Nehru Solar Mission (JNNSM) which was established by the Indian government
The National Solar Mission intended to "establish India as a
global leader in solar energy, by creating the policy conditions for
its diffusion across the country as quickly as possible."
In addition, the JNNSM was also a "major contribution by India
to the global effort to meet the challenges of climate change."
For promoting solar power, the Indian government entered into long-term
power purchase agreements with solar power developers, providing a
guaranteed rate for a 25-year term. The power developers had to implement
domestic content requirements which required using certain Indian-manufactured
cells and modules.
India also justified its solar local content requirements by recourse
to the so-called "government procurement carve-out" under
GATT Article III:8(a) - which states that "national treatment
disciplines of GATT Article III shall not apply to laws, regulations
for government purchases and not with a view to commercial resale
or with a view to use in the production of goods for commercial sale."
In effect, the domestic content and renewable energy credit programs
followed by the eight states of the USA seem to be much more expansive
and comprehensive than what India had followed under JNNSM, according
to legal analysts familiar with the dispute.
Surprisingly, the Indian government waited for three years instead
of simultaneously launching the dispute against the US after Washington
resorted to dispute settlement proceedings in 2013.
India ought to have followed the European Union which launched the
subsidy dispute against the US civil aircraft giant Boeing immediately
after the US raised the dispute against the EU's Airbus.
By delaying the dispute for three years, India has now lost the strategic
leverage with the US in the solar dispute, according to a legal analyst
who asked not be quoted.
The US trade representative had already cautioned India that a fresh
trade dispute by New Delhi against the alleged local content requirements
and subsidies provided by several US states and supported by US federal
administration will not be helpful, according to PV Tech, an American
"Tit-for-tat WTO filings will not support our (US-India) shared
efforts to deepen our bilateral economic ties, nor are they a responsible
use of WTO resources," a US spokesperson told PV Tech on 19 April.
The US provides subsidies worth tens of billions of dollars for promoting
The better response from India, the USTR spokesperson told PV Tech,
is not to file additional cases but drop its DCR entirely, and find
alternative measures to promote its domestic solar manufacturing.
The moot issue in the USTR response to PV Tech is whether the US and
its federal constituent states will do the same by dropping their
domestic content requirements and subsidies for the renewable energy
sector, the legal analyst asked.