The World Trade Organization (WTO) recently ruled against India's "buy-local" provisions for large solar projects, which are entitled to subsidy and assured government procurement if the equipment is manufactured locally. Filed by the US in 2013, the case was brought to remove any disadvantage to imported solar equipment in India. The WTO has a history of supporting anti-climate and anti-environment rulings, with Canada recently losing a similar case on renewable energy and incentives for local firms in Ontario.
The National Solar Mission (NSM) is the flagship component of India's climate action plan, as well as essential for the country's future energy security. An ambitious target to scale up solar electricity production from 5GW currently to 100GW by 2022 requires access to affordable equipment. It is widely agreed, including by countries filing anti-climate cases in the WTO, that a domestic clean energy industry would find it difficult to stay afloat unless policy and economic incentives are provided.
An urgent scale-up of climate ambition is required... However, the incompatibility of WTO rules, along with double-speak from big member-states, is geared to derail the process.
The Make in India program aims to provide political and popular support to the Indian economy's transition to clean energy. The core logic is to make clean energy affordable through domestic manufacturing, especially since the recent Paris Agreement on global climate change action did nothing to expedite transfer of clean technology from developed to developing countries. The Paris Agreement also failed to address strongly the alignment of counter-productive international trade agreements with climate imperatives.
In response to the WTO case, India has offered to alter NSM's "buy-local" provisions by restricting it to solar equipment for its own use, such as railways and defence, and not for reselling the electricity. This offer plays on WTO's GATT Article III exception wherein the government can favour domestic products in procurement policies if the procurement is "not with a view to commercial resale". Close on the heels of the Canada's case, this alteration is a worrying precedent since many of the world's public energy utilities procure electricity rather than electricity-generating equipment.
Additionally, the case is ironic since 23 states within the US use "buy-local" incentives to facilitate their transition to a clean energy economy. Moreover, President Obama himself had expressed his support of India's low-cost, high-quality manufacturing program under NSM. The US itself is also under breach of WTO rules for its cotton subsidy under Farm Bill 2014, suppressing international prices affecting African and Indian cotton producers to the tune of US$80 million and US$800 million per year, respectively.
The WTO must not come in the way of emerging economies' initiatives to raise and achieve climate ambitions...
The Paris Agreement is in its early days and an urgent scale-up of climate ambition is required worldwide. However, the incompatibility of WTO rules, along with double-speak from big member-states, is geared to delay and derail the whole process. The Trans-Pacific Partnership free trade agreement is also aimed to replicate antiquated WTO rules, if it is passed.
These developments are important to note since some other key global initiatives involving India, such as the International Solar Alliance of developing countries and Mission Innovation, will rely extensively on access to affordable technology and equipment, for which it is essential to have a domestic manufacturing industry.
"Buy-local" provisions are essential to generate political and popular support for the economic transition as they create jobs, promote health and make the process cost-effective, encouraging trade unions and vote banks to extend their cooperation. These provisions also support urgent action when international climate negotiations have been dragging along for over two decades.
The WTO's anti-climate rulings provide a boost to the fossil fuel lobby as the clean energy industry will not be allowed to grow...
The WTO must not come in the way of emerging economies' initiatives to raise and achieve climate ambitions, especially when they have been largely left to fend for themselves in the new Paris Agreement climate regime. The WTO's anti-climate rulings provide a boost to the fossil fuel lobby as the clean energy industry will not be allowed to grow to reach a stage where it can influence national and state climate policies. Instead, the WTO's non-discrimination rules must allow for exceptions for the cause of global and local public good -- such as addressing climate change.
Countries and unions such as the US, Japan and the EU must provide strength to the global momentum towards clean energy instead of pulling it back down. India has not excluded foreign investment in the country, and is inviting manufacturing companies and investors to set up shop here -- and this is where constructive focus needs to be.
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