Financial innovation and climate change: the case of renewable energy certificates and the role of the GATS

Energy has come to the forefront of the public debate in the past decade for two main reasons: the first relates to the lack of a secure, continuous, and unconditional energy supply in the importing countries, mostly developed and transition economies, which are still dependent on non-renewable carbon-based fossil fuels. The second reason is that uncontrolled production, distribution, and use of conventional energy may lead to environmental degradation and global warming. Renewable energy certificates (RECs) are instruments that allow countries to promote energy generation from renewables and form part of domestic policies aimed at climate change mitigation and adaptation. Since RECs can be traded in secondary markets, this paper discusses issues raised by the nature of and the trade in RECs which can be of concern for the General Agreement on Trade in Services (GATS) and the multilateral regulation of trade in financial services, notably in the case where World Trade Organisation (WTO) Members undertook sweeping commitments in financial services which equally apply to trade in RECs.