Domestic Application of International Law ♦ Note 65 Va. J. Int’l L. 129 (2024)

The Brazilian Clean Energy Transition Under WTO Subsidies Law

GENEVIEVE MCCARTHY

The public is calling for an energy transition as the consequences of climate change grow increasingly difficult to mitigate. Many states are determined to use government incentives to achieve this transition. These incentives often include subsidies that are illegal under the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) and other agreements. The bounds of these subsidies’ illegality are made unclear by inconclusive case law at the WTO Dispute Settlement Body (DSB). In recent cases, the DSB has relied on the non-discrimination provisions of other agreements instead of the ASCM, resulting in a dearth of interpretations of the key subsidies agreement. Subsidies programs have been rolled out across the world in this legal limbo, despite doubts that these programs would pass legal muster at the now partially defunct DSB. Brazil has Latin America’s largest renewable energy market by capacity and investment, as well as one of the world’s greenest energy mixes. The country’s auction scheme, development bank loans, and electricity regulation mechanisms have played a role in this ascent. Brazilian President Luiz Inácio Lula da Silva has made clear that the country wants to be a leader in renewable energy promotion, and it has the competitive advantage to do so. At the same time, Brasília ostensibly wants to avoid conflict with the WTO. This Note analyzes Brazil’s steps towards the energy transition under the ASCM and WTO case law.