It didn’t really come as a surprise when, last week, the WTO denied Canada’s appeal and again ruled against the made-in-Ontario provisions of the province’s green energy program.
The WTO was widely expected to side with Japan and the EU who claimed that Ontario’s program gives preferential treatment to Ontario firms and discriminates against foreign competitors. In fact, the program was designed to do exactly that in order to give a boost to Ontario’s manufacturing sector.
Ontario’s position, which was backed by the federal government, was that contracts with electricity generators are signed by governments, and the local content rules are okay because this type of government procurement is exempt from these international trade deals.
By requiring that 60 per cent of any solar project and 25 per cent of the parts and labour in any wind farm be sourced from Ontario in order to receive favourable rates, the domestic content requirements were drafted to ensure that Ontario’s demand for windmills and solar panels would translate into demand for Ontario-made products and, therefore, Ontario jobs.
The Act is called the Green Energy and Green Economy Act because it explicitly links economic and environmental objectives and makes it clear that, rather than having to choose between the environment and the economy, we can and must choose both.
Ontario’s program is groundbreaking by linking green energy and local jobs, but using government spending as a local economic stimulus is common practice around the world. Much of the U.S. government’s spending in the aftermath of the financial crisis had a “Buy American” clause. And E.U. countries regularly support their domestic manufacturers by sourcing products locally.
This notion is not foreign to Canada either. Just last year, large ship building contracts were awarded to a Nova Scotia firm under the condition that they create jobs in that province. And very recently, the federal budget linked spending on defence to economic stimulus and job creation in Canada.
When the Ontario government created the local content rules, they were following the example set by the federal government and these other countries - and improving upon it. They chose to support not just any jobs, but green jobs. They chose to set a direction for the province that has obvious environmental benefits, but also gives Ontario firms a leg up in what has been and will continue to be one of the fastest growing sectors of the global economy – renewable energy.
Last year, over $280 billion was spent on renewable energy globally, and that number is projected to jump by 230 per cent, to $630 billion per year by 2030. In the words of the Paris-based International Energy Agency, renewables have become “an indispensible part of the global energy mix”... “and, by 2035, they [will] approach coal as the primary source of global electricity.”
Ontario is in a position to service this growing demand. The companies are here now. Our workforce has the skills. And our capacity to manufacture wind and solar has far exceeded our expectations – so much so that the province is looking at upping the renewable energy targets in the Long Term Energy Plan, because getting 13 per cent of our electricity from wind and solar power will be a snap, thanks to the Green Energy Act.
Importantly, the challenge by Japan and the EU was provoked by the success of Ontario’s program. It was lodged because these countries want a share of the jobs and growth stemming from the rapid expansion of renewable energy in the decades ahead. And they were worried about Ontario’s leadership position, and the advantage it gives us in servicing the North American market.
The WTO’s ruling is unfortunate. But the good news is that the Ontario government has many options for how it can continue to support Ontario’s newest industry.
The province must now decide what it will do. But the evidence is clear: Ontario was right to use its purchasing to support Ontario’s workers, and it was right to bet on renewable energy.