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Green energy has Japan seeing red

A new law blamed for soaring hydro rates in Ontario is causing consternation abroad, as Japanese officials announced Monday they are launching a trade challenge of the controversial Green Energy Act. The Japanese say the law unfairly shuts them out of the market because it includes rigid domestic content rules.

Buy Ontario provisions in Act could lead to trade sanctions

A new law blamed for soaring hydro rates in Ontario is causing consternation abroad, as Japanese officials announced Monday they are launching a trade challenge of the controversial Green Energy Act.

The Japanese say the law unfairly shuts them out of the market because it includes rigid domestic content rules. By 2012, as much as 60 per cent of the goods and labour in provincial green energy projects will need to come from Ontario.

Premier Dalton McGuinty's government included the content rules to fashion a home-grown green energy industry. The premier viewed the policy as a means to bolster Ontario's faltering manufacturing sector with a new, cutting-edge industry.

However, Tokyo contends the provision violates longstanding rules of the Geneva-based World Trade Organization. The Japanese delegation to the WTO filed a request for bilateral talks with Canada on Monday, the first step in a formal challenge.

McGuinty appeared unfazed. Speaking to reporters on the day that the legislature formally resumed, he said the province "struck the right balance" with the law.

"We are determined to be a manufacturing... more [truncated due to possible copyright]  

Buy Ontario provisions in Act could lead to trade sanctions

A new law blamed for soaring hydro rates in Ontario is causing consternation abroad, as Japanese officials announced Monday they are launching a trade challenge of the controversial Green Energy Act.

The Japanese say the law unfairly shuts them out of the market because it includes rigid domestic content rules. By 2012, as much as 60 per cent of the goods and labour in provincial green energy projects will need to come from Ontario.

Premier Dalton McGuinty's government included the content rules to fashion a home-grown green energy industry. The premier viewed the policy as a means to bolster Ontario's faltering manufacturing sector with a new, cutting-edge industry.

However, Tokyo contends the provision violates longstanding rules of the Geneva-based World Trade Organization. The Japanese delegation to the WTO filed a request for bilateral talks with Canada on Monday, the first step in a formal challenge.

McGuinty appeared unfazed. Speaking to reporters on the day that the legislature formally resumed, he said the province "struck the right balance" with the law.

"We are determined to be a manufacturing centre of excellence when it comes to wind turbines, solar panels and the like. If there's a concern that they might raise that's an appropriate route for them to pursue, we'll deal with that in due course."

Experts say Ontario should have been aware of the dangers of the provisions. They say the federal government would have a tough case defending Ontario before an international tribunal.

"The issue is that the Ontario government -- in typical Ontario government fashion -- is putting together policies that favour domestic suppliers," said Michael Hart, a trade expert and former federal bureaucrat.

"And the whole thrust of the WTO and GATT has always been to say that's not right," added Hart, who holds the Simon Reisman Chair in Trade Policy at Carleton University's Norman Paterson School of International Affairs. "You must compete on the basis of price and quality, not on the basis of your citizenship."

Donald Campbell, a trade expert and former Canadian ambassador to Japan, says the complaint is an unusual move by Canada's G-8 partner.

"It's interesting, because Japan has not been a major user of tribunals," says Campbell, currently a senior adviser at the law firm Davis LLP.

A possible factor is Ontario's massive $7-billion contract with a Korean consortium led by industrial giant Samsung. The deal will give the Korean firm preferential rates and priority access to the province's grid for a host of large-scale wind and solar projects. The consortium has also agreed to build four manufacturing facilities in the province by 2013.

"Let me put it this way, (that deal) is probably in the atmosphere," said Campbell.

Ontario was on the other side of the argument in 2009, when the U.S. government included "buy American" provisions in its stimulus bill.

"Ontario was among the first to complain," said Hart, who added the McGuinty government should never have enacted similar provisions in its own legislation.

"I'm not privy to the advice he's getting from his officials. But I'm not confident the advice is the best," he says.

The Green Energy Act, which came into effect in May 2009, is being criticized for the heavy impact it will take on home electricity bills. The bill, through its so-called 'feed-in tariff,' offers generous rates over long periods for those who enter the green energy market.

Those rates are as much as 2,000 per cent greater than the current market price for electricity in the province.

Energy bills have already risen 15 to 20 per cent in the past several months and are projected to rise more.

The current trade dispute could add to that burden.

If Canada does not reach an agreement with Japan on the issue, a WTO panel would arbitrate the dispute in a process that could end in retaliation. The process will take one to two years.

It is unclear whether Ontario politicians weighed the risk of trade sanctions when they enacted the law. Energy minister Brad Duguid did not answer directly when asked that question Monday.

Instead, he took the trade challenge as a sign of the legislation's success.

"It doesn't come as a surprise to us because the Green Energy Act is making Ontario a place of destination for clean energy development jobs and investment. We've made an international splash.

"So with all that attention you would expect that other jurisdictions may well look at things like domestic content."


Source: http://www.ottawacitizen.co...

SEP 14 2010
http://www.windaction.org/posts/28066-green-energy-has-japan-seeing-red
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