• MOFCOM Investigates U.S. Aid To Renewable Energy Industry
  • January 5, 2012 | Authors: Gilbert B. Kaplan; Jeffrey M. Telep; Taryn Koball Williams; Bruce Wilson
  • Law Firm: King & Spalding LLP - Washington Office
  • Following the recent decision by the U.S. International Trade Commission (“ITC”) to initiate investigations into Chinese governmental subsidies of its solar energy industry, two Chinese trade associations representing the Chinese renewable energy sector filed their own petition in China in late October, asking the P.R.C. Ministry of Commerce (“MOFCOM”) to conduct an investigation of federal and state subsidies in the U.S. renewable energy industry. On November 25, MOFCOM announced its initiation of an investigation into U.S. state programs as subsidies in contravention of the WTO Agreement on Subsidies and Countervailing Measures (“SCM”). This announcement indicated that the investigation would primarily focus on renewable energy incentives that lend support to solar, wind, and hydropower technologies in Washington State, Ohio, New Jersey, Massachusetts, and California.

    The investigations allege that targeted state programs provide companies located within those states with financial incentives to either manufacture or install solar and wind technology. These programs are said to provide additional incentives for the use of components manufactured within the respective state. The targeted program in California is unique because it operates through public utility companies to encourage consumers to install on-site generation facilities to reduce aggregate demand on the electric grid. The petition treats electricity rates set by the California Public Utilities Commission as a financial contribution provided by government.

    MOFCOM appears not to have accepted the entire range of programs cited by the Chinese petitioners. In addition to the aforementioned programs, the Chinese petitioners listed federal procurements under the Buy-American Provision of the American Recovery and Reinvestment Act of 2009 as a violation of article 3.1 of the SCM, among other WTO obligations. Furthermore, the Chinese trade associations sought an investigation of another 2,324 state and federal programs that are allegedly “actionable” subsidies under article 5 of the SCM. These federal and state programs include appropriations, tax rebates, loan guarantees, bond issues, individual and corporate income tax deductions and exemptions, sales and property tax exemptions that relate either to the use of renewable energy technology or energy conservation. A U.S. Department of Energy database of federal and state incentives for renewable energy and energy conservation may have inadvertently assisted the Chinese petitioners.