Free trade rules undermine local economic growth: Ontario Liberals remove local content requirements for green energy

Ontario is removing the requirement that new green energy generation capacity has to include local content and labour.

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This move by the Ontario Liberals is in response to a 2012 World Trade Organization ruling that stated the way Ontario had structured their buy local provisions in the Green Energy Act was illegal under current free trade agreements signed by Canada.

The Toronto Staris reporting:

Ontario will no longer require renewable energy developers to use local suppliers, says energy minister Bob Chiarelli.

The move, announced Wednesday, is not a surprise, since the province had lost a challenge before the World Trade Organization (WTO) on its local content rules.

But it’s a turn-around for the Liberal government, which put the rules in place to boost the manufacturing economy as it staggered during the last recession.

The Sustainable Trade Bulletin (Vol 2) (French version here) outlined the reason for this decision. It is connected to a ruling by the World Trade Organization (WTO) in a response to a complaint against Ontario local content requirements for green energy in the Green Energy Act launched by the EU and Japan on behalf of its corporations:

In December 2012, the World Trade Organization decided that minimum local content requirements in Ontario’s landmark Green Energy Act violated international trade rules, as the European Union and Japan had argued. It was an expected but still disappointing decision that challenges the ability of communities around the world to develop renewable energy sustainably and with maximum social and economic benefit.

Local content requirements are used around the world (outlined in the bulletin linked above) to use public investments to support local economic development. They are part of the group of tools used by governments to support the transition to more sustainable energy production and local jobs and investment to facilitate that transition.

It doesn’t have to be this way.

Scott Sinclair of the Canadian Centre for Policy Alternatives outlined some changes that could be brought into the Green Energy Act that would allow for local content. The Canadian Union of Public Employees has suggested more public ownership of energy productions, especially given that the move to renewable energy production could also solve this problem. This would allow the government to require local content in the production and maintenance of these new sources of power. It would also bring green energy back under public control and level out the growth in green energy production to avoid wild fluctuations in investment.

There are many other options for expanding green energy production in a way that also maximizes local economic benefit. The Ontario government should consider those alternatives before abandoning the use of public investment in green energy as a tool for local economic development.