The Limits Imposed on EU Green Industrial Policy by WTO Law

Motivated by the current political context in the European Union, which aims to pursue a more strategic approach to green industrial policy while remaining compliant with the rules of the World Trade Organization (WTO), this article sets out to map the policy space available for combining these goals. The article starts by providing a definition and categorization of green industrial policy measures, then goes on to summarize the relevant provisions of the General Agreement on Tariffs and Trade (GATT), the Agreement on Technical Barriers to Trade and the Agreement on Subsidies and Countervailing Measures, and finally discusses how – for each of the main categories of green industrial policy: subsidies and public procurement, border measures and internal regulations – measures can be designed to be in line with WTO disciplines. It finds that the WTO framework does provide possibilities for most green industrial policy measures to pass the test if they are carefully designed to avoid trade distortions and are driven primarily by environmental objectives; but that the case law leaves important questions unresolved, in particular: (1) whether there are any safe harbours for certain types of industrial subsidies, (2) whether any difference in average treatment between domestic and foreign producers (even when entirely due to different sustainability performance) constitutes de facto discrimination, and (3) whether secondary industrial policy objectives can undermine the validity of a genuine environmental policy for the purposes of the GATT’s general exceptions clause.