China's FIT Scheme For Solar PV Electricity And Its Conformity Under The SSM Agreement

China has implemented its Feed-in-Tariff Scheme(the "FIT Scheme")for solar PV electricity since 2013 to support the development of solar energy sector.Generally speaking,China's current FIT Scheme can be divided into two categories:one is the relevant measures promulgated by the central government,which applies to the whole jurisdiction;the other one is the measures introduced by the local government,which only applies in specific cities or towns.The FIT Scheme requires the state grid corporation to purchase certain amount of solar PV electricity at the fixed price determined by Chinese government,and allows municipal governments to provide further supports to solar PV electricity producers.Although FIT Scheme can be justified by the externality theory proposed by welfare economists,as a way of market intervention,it still subjects to the provisions under the WTO framework,especially those in the Agreement on Subsidies and Countervailing Measures(the "SCM Agreement").This dissertation will analyze the compatibility of China's FIT Scheme with the SCM Agreement.The SCM Agreement regulates two kinds of subsidies,i.e.the actionable subsidy and the prohibited subsidy.According to Article 1 of the SCM Agreement,to find a measure to be an actionable subsidy,three criteria needs to be met:1)the measure should be a financial contribution provided by the government or the public body;2)the measure should confer a benefit to the recipient;3)the measure should be specific.And for a measure to be a prohibited subsidy,the measure must also ensure that the grant of the subsidy is contingent upon exportation,or upon the use of domestic over imported goods as per Article 3 of the SCM Agreement.This dissertation argues that the FIT Scheme for solar PV electricity implemented in most parts of China constitutes actionable subsidy.First,the state grid corporation that carries out the FIT Scheme is a public body,because it is under the "meaningful control" of the central government,and its purchase of solar electricity is a form of financial contribution provided in Article 1.1(a)of the SCM Agreement.Second,the FIT Scheme confers a benefit to the solar electricity producers.According to the appellate body in Canada-Renewable Energy,to determine whether a certain measure confers a benefit or not,one should first define the relevant product market and then select a benchmark for comparison in the defined market.In our case,as the solar electricity cannot be substituted by electricity generated from conventional energy in both the supply-side and the demand side,the relevant product market should be the solar electricity market.And the benchmark for comparison should be the bidding price in the solar electricity market.After comparing the FIT price with the benchmark,it can be concluded that the FIT price in most parts of China is higher than the benchmark,so that the FIT Scheme confers a benefit to the solar electricity producer.Third,the FIT Scheme is specific,because it is only available to solar electricity producers.In addition,some relevant measures introduced by the local governments are prohibited subsidies as per Article 3,1(b)of the SCM Agreement,due to its"local content requirement".Although China's current FIT Scheme for solar PV electricity may not fully conform with the SCM Agreement,it is a necessary policy for encouraging the exploitation of solar energy and promote sustainable development.The contradiction between following the SCM agreement and developing renewable energy is not only confronted by China,but also confronted by many other countries in the world.Therefore,scholars proposed three major ways to resolve such conflict.The first one is to reactivate and amend the"non-actionable subsidy" provision(Article 8)in the SCM Agreement;the second one is to introduce GATT Article 20 to the SCM Agreement;the third one is to interpret the SCM Agreement in a progressive perspective.The author believes that the third solution is the best and the most feasible one so far.