The AB report in Canada - Renewable Energy/Feed-In Tariffs has been circulated. There's a lot to digest in the reasoning on "benefit," and I've only just skimmed it, but my impression is that they have tried to provide some flexibility under the SCM Agreement to governments who want to promote clean energy. Here's a key passage:
5.188. Nevertheless, a distinction should be drawn between, on the one hand, government interventions that create markets that would otherwise not exist and, on the other hand, other types of government interventions in support of certain players in markets that already exist, or to correct market distortions therein. Where a government creates a market, it cannot be said that the government intervention distorts the market, as there would not be a market if the government had not created it. While the creation of markets by a government does not in and of itself give rise to subsidies within the meaning of the SCM Agreement, government interventions in existing markets may amount to subsidies when they take the form of a financial contribution, or income or price support, and confer a benefit to specific enterprises or industries.
5.189. We further note that a comparison between renewable energy electricity generators and conventional energy electricity generators requires consideration of the full costs associated with the generation of electricity. In this respect, if, on the one hand, higher prices for renewable electricity have certain positive externalities, such as guaranteeing long-term supply and addressing environmental concerns, on the other hand, lower prices for non-renewable electricity generation have certain negative externalities, such as the adverse impact on human health and the environment of fossil fuel energy emissions and nuclear waste disposal. Considerations related to these externalities will often underlie a government definition of the energy supply-mix and thus be the reason why governments intervene to create markets for renewable electricity generation. On this point, we agree with the Panel's statement that, where government intervention that internalizes social costs and benefits is limited to defining the broad parameters of the market, "significant scope will remain for private actors to operate within those parameters on the basis of commercial considerations".
5.190. In the light of the above, and in particular in view of the fact that the government's definition of the energy supply-mix for electricity generation does not in and of itself constitute a subsidy, we believe that benefit benchmarks for wind- and solar PV-generated electricity should be found in the markets for wind- and solar PV-generated electricity that result from the supply-mix definition. Thus, where the government has defined an energy supply-mix that includes windpower and solar PV electricity generation technologies, as in the present disputes, a benchmark comparison for purposes of a benefit analysis for windpower and solar PV electricity generation should be with the terms and conditions that would be available under market-based conditions for each of these technologies, taking the supply-mix as a given.
How big will this government creating a market "exception" be? Will governments look for opportunities to use it to make financial contributions in a way that does not confer a benefit? What other goods that might not exist in a market could governments act to create?
