Climate Change and the WTO

  • IPCC report number 4states that climate change in caused by man
    • This is a unique issue, because the emissions of each country affect every other
  • There are possible ways to curb this within trade, but these all have issues in WTOlaw:
    • Only import low footprint goods (TBT … a non-product PPM)
    • Duty free treatment for climate friendly products (possible issue with MFN if the goods are “like”)
    • A national system with a border tax adjustment (possibly excepted under Art 2.1 since it has an equal national tax, but might have issues under Art. 1)
    • Punitive treatment for countries with high emissions (blatant MFN breach, possibly excepted by Art. XX)
    • Carbon trading schemes with an initial free allocation of credits (possibly an illegal subsidy)

Bodies involved

  • WTO
    • A body for liberalising trade
    • There are no special rules for climate change, but there are rules which may be used in that
    • The legality of GHG reducing trade policy is not being negotiated
    • Wider membership than the WTO (192 members)
    • Built Kyoto, and negotiating Post-Kyoto Agreement
    • Here, developing countries are not capped
    • Doesn’t address trade directly
      • But does ask for members to try to minimise the trade effects of reducing GHG emissions
  • COP 13/15
    • negotiating the new Kyoto
    • the ministers, in a sideline, agreed (albeit informally) that multilateral trade should be used to reduce emissions


  • Environmental market access has only made headway in negotiations in Industrial Goods, specifically in:
    • NAMA (Non-Ag. Manufactured Goods)
      • negotiating market access
    • CTE (Committee on Trade and Environment)
      • defining “environmental product” — this has been the hold-up

Specific Trade Measures

Border Carbon Adjustments

  • A tax on goods equal to the cost on domestic goods of an emission reduction scheme
    • Prima Facie, it seems to be a breach of GATT Art. 2 [national treatment], however, since it is equivalent to a domestic charge
  • However, it may run into some issues if it discriminates between other countries (those who have an emission reduction scheme, and those who don’t) because of GATT Art. 1[MFN]
    • Thus, for it to be valid, it must be excepted under Gatt Art. 20
      • It should be fine under paragraph “g”
      • but it may have issues with the Chapeaux
        • if it applies to all products, it should pass “arbitrary”
        • but it must also be proportionate, which would have to be proven to the panel

Non-Product PPM

  • E.g. production methods, shipping, etc.
    • [] Issue whether Kyoto is the full/exclusive agreement
    • Either way, this has to pass TBT and GATT Art. 20
      • which would require a comparison to international standards
        • any deviation from which would have to be shown as being necessary —> proportionality

International Standards

  • International standards should not be set by the WTO
  • International standards may make TBT’s in the name of Climate Change more forgivable


  • look to the Subsidies Agreement (SCM) for the rules on subsidies – there used to be a green light subsidy exception for the environment, but this has lapsed


  • A Sustainable Energy Trade Agreement plurilateral
  • Legal issues:
    • Issues with Art. 24– “substantially all trade” requirement
    • Could possibly be waived
  • Political issues:
    • defining products it would deal with
    • convincing BRICS to join
    • Countries spending money on green tech often want domestic improvement – therefore, they often have local content requirements
    • Thus, biggest issue is not legal, but political

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