The Prohibition of local content requirement subsidy for Renewable Energy in the WTO System

The promotion of the renewable energy calls for substantial direct investment as a sine quo non; in order to reduce the cost of investment, the government should also support the producers and investors. One of the most common and effective methods that the governments apply to support the clean energy is providing local content requirement subsidy. Despite the environmental necessities and the implementation of the industrial policies due to this type of subsidy, Agreement on Subsides and Countervailing Measures has prohibited this type of support without any quality assessment and analysis of its impacts on the environment whatsoever, drawing its fair share of criticisms from the environmentalists. In this regard, several researchers and scholars, have recommended the regulations proffered by the General Agreement Tariffs and Trade (GATT) and the approach adopted by the dispute settlement body as a viable solution. The present study, analyzing the regulations provided by GATT and dispute settlement bodies consequences, concludes that due to the unclarity, generality, flexibility and failing to meet the positive and negative requirements, the aforementioned sources are deficient in removing the legal prohibition. Ergo, the best solution is revising the regulations of the Agreement on Subsides and Countervailing Measures.