Green subsidies under international trade law: Challenges and policy implications for Vietnam

Abstract

Green subsidies represent pivotal financial tools governments employ to foster environmentally sustainable practices across industries and among consumers. These subsidies are not just financial aids, but urgent measures to mitigate the environmental impact of economic activities, encouraging the adoption of renewable resources and the development of green technologies. However, their intersection with international trade law presents challenges, particularly under the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement). Disputes brought before the WTO, such as Canada - Certain Measures Affecting the Renewable Energy Generation Sector (DS412), India - Certain Measures Relating to Solar Cells and Solar Modules (DS456), and United States - Certain Measures Relating to the Renewable Energy Sector (DS510), have demonstrated how certain forms of green subsidies, especially those tied to local content requirements, can be found inconsistent with global trade rules.

For nations like Vietnam, which is increasingly integrated into the global economy, the design and deployment of green subsidies must carefully balance environmental ambitions with compliance with international trade laws. This challenge becomes even more significant considering Vietnam’s major climate commitments, including its pledge at the 26th United Nations Climate Change Conference of the Parties to achieve net-zero greenhouse gas emissions by 2050 and reduce methane emissions by 30% by 2030. To achieve these goals, the Vietnamese government has introduced a framework to promote renewable energy.

This paper explores the intersection of green subsidies within WTO regulations, analyzes global trends in green subsidies, and assesses the legal compatibility of Vietnam’s current policy instruments. This study, therefore, suggests Vietnam practical recommendations to its green development policies to be compliant with international trade law and contribute to both national sustainability goals and deeper integration into the global green economy.