Local Content Requirements and the Green Economy

The study is far from an exhaustive examination of these issues. In many areas, the analysis is speculative, aimed at raising questions and suggesting areas where domestic and international policy makers may need to consider undertaking further analysis. Above all, it should be stressed that the study raises these matters at a very general level. Whether any given governmental measure is consistent with WTO rules is a highly contextual question, that may well depend on the exact design features of that particular measure, and its broader context – regulatory, technological and commercial. Thus, nothing in this study should be considered as a judgment that any actual measure of any particular government violates WTO rules.

The study has also been prepared at a time when countries across the income spectrum are taking a fresh look at local content requirements, after having largely phased them out in traditional strategic industries such as fossil fuel energy and automobiles. Questions explored include:

• What do we know about the economic and environmental effectiveness of performance requirements in green sectors?
• Do performance requirements provide a compelling business case, with short- and long-term returns?
• Is there anything unique about renewables that makes them a special case for performance requirements?
• Do the politics of accommodating the higher cost of renewable energy demand a clear-cut avenue towards job creation through localization?
• Does greening the value chains provide a new rationale for performance requirements?
• Can better governance play a role in dealing with protectionist elements of support measures?
• Are there any upsides for developing countries in a world where performance requirements are extensively used?

Objective evidence on the economic and environmental effectiveness of trade-related measures such as subsidies or local content requirements can provide the answers.