In the 2016 Indo-US dispute pertaining to Indian schemes relating to solar cells and solar modules (WT/DS456/AB/R), the WTO Appellate Body ruled against India for favouring domestically sourced solar panels over international panels, despite India raising issues relating to energy security and the environment.
Rather than critique the Appellate Body’s reasoning, I have chosen to critique the broader WTO legal framework in so far as it fails to provide sufficient flexibility for member nations to further energy security and environmental objectives. I have chosen the 2016 Indo-US dispute for the purposes of illustration, as it helps in clear identification of the interests that lack sufficient protection in the present regime.
But prior to delving into the core concern, a quick narration of the factual background would be apt.
India’s Jawaharlal Nehru Solar Mission provided for government acquisition of electricity from Solar Power Developers (SPDs) at a particular price for a particular period. The purchase of electricity was conditional upon certain Domestic Content Requirements (DCR). Essentially, the DCRs required the SPD to generate electricity using, at least, 25% of domestically sourced solar panels.
Hence, the US initiated the WTO dispute resolution process as internationally sourced solar panels weren’t provided the same benefits as the domestically produced panels. The WTO Appellate Body ruled in favour of the US, holding India’s policies to be in violation of GATT Art. III: 4 and TRIMs Agreement Art. 2.1 (obligation on countries to treat foreign products at par with goods of national origin). Further, it held that the exemptions, under GATT Art. III: 8(a) (exemption for government procurement), GATT Art. XX (d) (exemption for compliance with other laws) and GATT Art. XX (j) (exemption for increasing accessibility of scarce products), weren’t applicable to the case.
As has been stated earlier, I shall now critique the WTO regime for failing to provide sufficient leeway for member nations to take initiative to further vital energy security and environmental interests.
ENERGY SECURITY AND ENVIRONMENTAL CONCERNS
GATT Art. XXI, provides for “Security Exceptions”, but the ambit of the same is quite limited and extends solely to military concerns.
The availability of electricity is intertwined with various developmental metrics. A considerable portion of the Indian population survives without electricity and is consequently, subject to detrimental effects of being exposed to traditional fuel-based pollutants in closed settings (by virtue of directly utilizing traditional fuels). Therefore, insufficient supply of electricity can have major consequences on public health of a nation. Further, it is obvious that electricity supply is essential for manufacturing, transport and general development and functioning of the country. Hence, it is essential for countries to ensure that they are self-sufficient with respect to electricity generation.
Energy security relates to a country’s ability to generate electricity without being dependent on foreign entities. Given the harsh consequences of insufficient electricity generation on the nation, countries should be given flexibility to initiate schemes that further energy security, as it relates closely to a nation’s security.
Similarly, environmental concerns also should be given their due recognition. According to a 2016 World Health Organization (WHO) report, 11 of the 12 most polluted cities were from India (refer here). Again, air pollution is closely linked with public health and therefore, schemes aimed at furthering schemes that promote renewable eco-friendly energy sources should be given greater leeway under the WTO regime.
At first glance, it would seem that promoting locally manufactured solar panels at the cost of internationally sourced ones wouldn’t affect the environment, but having a domestic solar panel industry is essential for India to comprehensively embrace solar energy. Allow me to explain.
If a particular technology is to be adopted, it needs to be accessible. Accessibility doesn’t just involve availability of the product, but also involves ease of availability of affiliated services, such as availability of experts for servicing and maintenance. Therefore, a domestic industry needs to be nurtured for making solar energy generation a mainstream source of renewable energy.
Lastly, the interests of energy security and environmental protection are relevant both as independent concerns (as outlined above) and also as intertwined issues. If a country isn’t self-sufficient with respect to eco-friendly electricity generation (as opposed to merely electricity generation simpliciter), then it will have to either depend on foreign entities for eco-friendly electricity, or else, resign to the consequence of subjecting its populace to the deleterious public health consequences (by virtue of pushing them towards utilizing traditional fuels). Therefore, self-sufficiency merely in electricity generation simpliciter, overlooking environmental concerns, shouldn’t be considered to satisfy the requirements of energy security, as it is possible to hold a country hostage even if it is energy secure (with respect to traditional fuels), if it isn’t self-sufficient with respect to eco-friendly energy.
Hence, given the circumstances and pressures that countries face with respect to energy security and environmental concerns, the WTO legal framework should accommodate for said interests.
Image taken from here.