Regulating the future hydrogen trade in the EU: WTO law considerations

Abstract

The concept for the extensive use of hydrogen as an energy carrier is not new but has regained traction recently. To drive the development of the hydrogen economy, national regulatory frameworks for the hydrogen economy are emerging in many parts of the world, including the European Union. The focus of this contribution is on the interaction of the emerging EU hydrogen policies and regulations with the rules of the WTO. The key finding is that conflicts between the norms of the EU and the WTO can be avoided, but policymakers need to act for this to be accomplished.

Keywords:

• hydrogen
• WTO
• EU
• regulation

Acknowledgements

The author gratefully acknowledges the public financing of Business Finland for the ‘HYGCEL’ project.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Rossana Scita, Pier Paolo Raimondi and Michel Noussan, ‘Previous Waves of Enthusiasm for Hydrogen: Will This Time Be Different?’ in Manfred Hafner (ed), Green Hydrogen: The Holy Grail of Decarbonisation? An Analysis of the Technical and Geopolitical Implications of the Future Hydrogen Economy (Fondazione Eni Enrico Mattei [FEEM] 2020) 1–31

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

2 IRENA, Global Hydrogen Trade to Meet the 1.5°C Climate Goal: Part I – Trade Outlook for 2050 and Way Forward (International Renewable Energy Agency 2022); IEA, The Future of Hydrogen: Seizing Today’s Opportunities (International Energy Agency 2019, Paris)

3 Melaku Geboye Desta, ‘The Organization of Petroleum Exporting Countries, the World Trade Organization, and Regional Trade Agreements’ (1 June 2003) 37(3) Journal of World Trade 523, https://doi.org/10.54648/TRAD2003026; ; G. Marceau, ‘The WTO in the Emerging Energy Governance Debate’, (2010) Global Trade and Customs Journal 5(3)

4 J Pauwelyn (ed), Global Challenges at the Intersection of Trade, Energy and the Environment (The Graduate Institute 2010)

5 European Commission, The European Green Deal, 11.12.2019, COM(2019) 640 final, 8 <https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6691> accessed 17 January 2023

6 European Commission, Hydrogen Strategy for a climate-neutral Europe, 8.7.2020 COM(2020) 301 final

7 The European Commission defines carbon leakage as follows:

Carbon leakage refers to the situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints. This could lead to an increase in their total emissions. The risk of carbon leakage may be higher in certain energy-intensive industries.

Carbon Leakage <https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/free-allocation/carbon-leakage_de> accessed 11 August 2022

8 Ibid 13

9 See eg European Commission, RePowerEU Plan, 18.5.2022, COM(2022) 230 final

10 Jason Bordoff and Meghan L O’Sullivan, ‘The New Energy Order: How Governments Will Transform Energy Markets’ (2022) 101(4) Foreign Affairs 131

11 European Commission, Staff Working Document, Implementing the RePowerEU Plan: Investment Needs, Hydrogen Accelerator and Achieving the Bio-methane Targets, SWD(2022) 230 final

12 Renewable Energy – Method for Assessing Greenhouse Gas Emission Savings for Certain Fuels <https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12713-Renewable-energy-method-for-assessing-greenhouse-gas-emission-savings-for-certain-fuels_en> accessed 16 January 2023

13 Poduction of Renewable Transport Fuels – Share of Renewable Electricity (Requirements) (europa.eu), art 6. This makes reference to the methodology established in art 30(4) of Directive (EU) 2018/2001.

14 See eg HyLaw, EU Regulations and Directives which Impact the Deployment of FCH Technologies, February 2019 <https://ec.europa.eu/research/participants/documents/downloadPublic?documentIds=080166e5c162864e&appId=PPGMS> accessed 16 January 2023

15 WTO, World Trade Report 2022: Climate Change and International Trade, (WTO Publications 2022)

16 Under certain circumstances, trade in hydrogen may give rise to service aspects in a similar manner to the case with natural gas. See M Cossy, ‘Energy Services under the General Agreement on Trade in Services’ in Y Selivanova (ed), Regulation of Energy in International Trade Law (Kluwer Law International BV 2011) 150–1. As outlined above, given the numerous uncertainties related to what the future hydrogen economy will look like, it is too early to give this question in-depth consideration

17 See eg CR Conrad, Processes and Production Methods (PPMs) in WTO Law : Interfacing Trade and Social Goals (Cambridge University Press (Cambridge International Trade and Economic Law) 2011)

18 J Potts, The Legality of PPMs under the GATT, International Institute for Sustainable Development (2008) <https://www.iisd.org/system/files/publications/ppms_gatt.pdf> accessed 16 January 2023

19 GATT, Working Party Report on Border Tax Adjustments, L/3464, para 18, 2 December 1970

20 WTO Panel Report, United States – Standards for Reformulated and Conventional Gasoline (US–Gasoline), WT/DS2/R, 29 January 1996, para 6.8

21 Moritz Wüstenberg, ‘Back to the Future: MFN Treatment in an Era of Protectionism’ (8 November 2017) 86(4) Nordic Journal of International Law 525, https://doi.org/10.1163/15718107-08604004

22 The MFN principle is generally considered to be ‘[o]ne of the cornerstones of the WTO trading system’. See WTO, Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry (Canada – Autos) WT/DS139/AB/R, WT/DS142/AB/R, 31 May 2000, para 69

23 R Hudec, ‘“Like Product”: The Differences in Meaning in GATT Articles I and III’, in T Cottier and P Mavroidis, eds., Regulatory Barriers and the Principle of non-discrimination in World Trade Law (The University of Michigan Press 2000) 101–123

24 GATT, art III:4

25 Report by the Working Party on Border Tax Adjustment, BISD L/3464, 20 November 1970, para 18

26 WTO, Appellate Body Report, Japan – Taxes on Alcoholic Beverages (Japan – Alcoholic Beverages II), WT/DS11/AB/R, 4 October 1996, 22

27 WTO Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products (EC-Asbestos), WT/DS135/AB/R, 12 March 2001, para 114

28 Ibid para 111 (emphasis added)

29 Ibid para 99

30 Z Zhu and others, ‘A Discussion on the Legitimacy of Carbon Tariffs under the WTO’ (2011) 10 IPEDR 222

31 WTO Appellate Body Report, EC-Asbestos, para 122

32 Commission Implementing Regulation (EU) 2016/1821 of 6 October 2016 amending Annex I to Council Regulation (EEC) No 2658/87 on the Tariff and Statistical Nomenclature and on the Common Customs Tariff, L 294/213, CN Code 2804 10 00

33 WTO, Appellate Body Report, Japan – Alcoholic Beverages II, 22

34 RE Hudec, ‘Like Product: The Differences in Meaning in GATT articles I and III’ in T Cottier and P Mavroidis (eds), Regulatory Barriers and the Principle of Non-Discrimination in World Trade Law (The University of Michigan Press 2002) 117–118

35 WTO, Appellate Body Report, Japan – Alcoholic Beverages II, 21

36 WTO Appellate Body Report, EC-Asbestos para 103

37 Ibid para 99, 103

38 GATT, art III(4) (emphasis added)

39 Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the Promotion of the Use of Energy from Renewable Sources, OJ L 328, 21.12.2018, 82–209

40 WTO, Analytical Index, art XX <https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art20_jur.pdf> accessed 16 January 2023

41 GATT, art XX(b)

42 WTO Appellate Body Report, EC-Asbestos, para 172

43 GATT, art XX(g)

44 See eg , Japan – Alcoholic Beverages II, 14; WTO, Appellate Body Report, United States — Final Anti-Dumping Measures on Stainless Steel from Mexico (US – Stainless Steel (Mexico)), para 160; WTO, Appellate Body Report, Import Prohibition of Certain Shrimp and Shrimp Products (US — Shrimp), Recourse to Article 21.5 of the DSU by Malaysia, para 109; and WTO, Appellate Body Report, United States — Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina (US – Oil Country Tubular Goods Sunset Reviews), para 188

45 WTO, Legal Status of Adopted/Unadopted Reports in Other Disputes <www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c7s2p1_e.htm> accessed 24 March 2014

46 See eg EURACTIVE, The Road to Green Hydrogen Certification – and the Potholes to Be Avoided <www.euractiv.com/section/energy/opinion/the-road-to-green-hydrogen-certification-and-the-potholes-to-be-avoided/> accessed 06 August 2022

47 WTO, Panel Report, United States-Standards for Reformulated and Conventional Gasoline (US–Gasoline), WT/DS2/R, 29 January 1996, para 2.1–2.13

48 Ibid, para 3.1–3.12

49 Ibid, para 3.39

50 Ibid, para 3.42

51 Ibid, para 6.36–6.37; WTO, Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline (US–Gasoline), WT/DS2/AB/R, 28–29

52 SCM Agreement, art 1.1(a)(1)(i)–(iv)

53 Agreement on Subsidies and Countervailing, art 14(d)

54 V Pogoretskyy, ‘Freedom of Transit and the Principles of Effective Right and Economic Cooperation: Can Systemic Interpretation of GATT Article V Promote Energy Security and the Development of an International Gas Market?’ (1 June 2013) 16(2) Journal of International Economic Law 313, https://doi.org/10.1093/jiel/jgt016; Danae Azaria, ‘Energy Transit under the Energy Charter Treaty and the General Agreement on Tariffs and Trade’ (November 2009) 27(4) Journal of Energy & Natural Resources Law 559, https://doi.org/10.1080/02646811.2009.11435230

55 IRENA (n 2); IEA (n 2) 55–59