Green protectionism in the European Union: how Europe’s biofuels policy and the renewable energy directive violate WTO commitments

Dec 2009

This paper examines the trade-policy consequences of current approaches in the European Union towards biofuels. The EU uses a broad range of measures to subsidise the production of biofuels in Europe and to protect them from foreign competition. It is one of the biggest manifestations of “green protectionism” that is not about environmental policy itself, but about adding non-environmental objectives that are discriminatory, or overly trade restrictive in intent and/or effect, to environmental policy.
Now the EU is about to adopt a technical regulation in the Renewable Energy Directive that runs the risk of effectively cutting off market access for foreign competitors of European rapeseed oil. Unless it is changed, implementation of this measure also impacts Europe meeting its obligations of the agreements of the World Trade Organisation (WTO).
The Renewable Energy Directive sets out a new agenda for shifting away from fossil fuels. It directs the EU to adopt technical regulations and process and production method standards. Producers that do not meet those standards will not qualify for the excise-tax exemption or the national targets that EU member states should comply with. A sustainability criteria used in this technical regulation says that the greenhouse gas saving from a new entity of biofuels entering into the EU market should be at least 35% to qualify for the target and tax preference.
The author argues that this Directive is inconsistent with several core GATT articles. It violates Article I rules on “like products” and Article III and Article XI on national treatment. The Agreement of Technical Barriers to Trade is likely to present difficulties to the implementation of the Renewable Energy Directive.

By: F. Erixon (European Centre for International Political Economy)

 
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