Climate Mitigation Subsidies and the WTO Legal Framework: A Policy Analysis

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Most of the principal agreements of the World Trade Organization (WTO) contain exceptions or limitations clauses, which allow trade-restrictive policies where necessary or appropriate to advance legitimate public objectives such as the protection of health or the environment (for example, Article XX of the General Agreement on Tariffs and Trade [GATT] and Article XIV of the General Agreement on Trade in Services). In the case of subsidies, the WTO Subsidies and Countervailing Measures Agreement (SCM Agreement) originally included a defined list of subsidies to be deemed non-actionable, that is, subsidies immunized from challenge in WTO dispute settlement as well as from countervailing duty action (Article 8). This list included certain subsidies for research and development and for environmental protection, as well as to disadvantaged regions. However, this provision for deemed non-actionability only applied provisionally for the first five years that the SCM Agreement was in force. Since its effective expiry, WTO members have been unable to agree to either continue with the list as it now stands or to create a different list. Therefore, today no subsidy programs are explicitly protected as non-actionable.