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Carbon-related border tax adjustment: mitigating climate change or restricting international trade?

Published online by Cambridge University Press:  16 August 2011

CHRISTINE KAUFMANN  and
ROLF H. WEBER
CHRISTINE KAUFMANN*
Affiliation:
University of Zurich
ROLF H. WEBER*
Affiliation:
University of Zurich
*
*Email: [email protected]
**Email: [email protected]
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Abstract

Border tax adjustments in the form of carbon taxes on products from countries with lax environmental production standards or in the form of a required participation in an emissions allowances' trading system have become a heavily debated issue under WTO law. Such an adjustment might be permissible if energy taxes as indirect taxes are applied on inputs during the production process. Compliance with the Most Favoured Nation principle has less practical importance than the not-yet settled likeness discussion under the National Treatment principle. Consequently, since the compatibility of carbon-related border tax adjustment measures is partly contested, potential justifications such as the conservation of exhaustible national resources or the protection of health (Art. XX GATT) become relevant. The application of the necessity and proportionality test requires that carbon measures are tailored so as to substantially contribute to the achievement of environmental objectives and do not create any arbitrary or unjustified discrimination.

Type
Review Article
Information
World Trade Review , Volume 10 , Issue 4 , October 2011 , pp. 497 - 525
Copyright
Copyright © Christine Kaufmann and Rolf H. Weber 2011

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