Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-23T17:24:12.208Z Has data issue: false hasContentIssue false
  • English
  • Français

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]
Get access Rights & Permissions [Opens in a new window]

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aerni, Philipp, Boie, Bettram, Cottier, Thomas, Holezer, Kateryna, Jost, Dannie, Karapinar, Brais, Matteotti, Sofya, Nartova, Olga, Payosova, Tetyana, Rubini, Luca, Shingal, Anirudh, Temmerman, Fitzgerald, Xoplaki, Elena, and Bigdeli, Sadeq Z. (2011), ‘Climate Change and International Law: Exploring the Linkages between Human Rights, Environment, Trade and Investment’, German Yearbook of International Law, 53: 139–188.Google Scholar
Bernasconi-Osterwalder, Nathalie, Magraw, Daniel, Oliva, Maria Julia, Orellana, Marcus, and Tuerk, Elisabeth (2006), Environmental and Trade: A Guide to WTO Jurisprudence, London and Sterling, VA: Earthscan.Google Scholar
Bhagwati, Jagdish and Mavroidis, Petros C. (2007), ‘Is Action against US Exports for Failure to Sign Kyoto Protocol WTO-Legal?’, World Trade Review, 6(3): 299–310.CrossRefGoogle Scholar
Bierman, Frank and Brohm, Rainer (2005), ‘Implementing the Kyoto Protocol without the USA: The Strategic Role of Energy Tax Adjustments at the Border’, Climate Policy, 4: 289–302.CrossRefGoogle Scholar
Bonsi, Richard, Hammett, A. L., and Smith, Bob (2008), ‘Eco-Labels and International Trade: Problems and Solutions’, Journal of World Trade, 42(3): 407–432.Google Scholar
Bown, Chad P. and Trachtman, Joel P. (2009), ‘Brazil – Measures Affecting Imports of Retreated Tyres: A Balancing Act’, World Trade Review, 8(1): 85–135.CrossRefGoogle Scholar
Breining-Kaufmann, Christine (2001), ‘Ein Sieg für die Umwelt? – Der Entscheid der WTO im Asbest-Streit zwischen Kanada und der Europäischen Union’, Akutelle Juristische Praxis, 10: 1169–1180.Google Scholar
Button, Catherine (2004), The Power to Protect: Trade, Health and Uncertainty in the WTO, Oxford and Portland (Oregon): Hart Publishing.Google Scholar
Charnovitz, Steve (2003), ‘Trade and Climate: Potential Conflicts and Synergies’, Beyond Kyoto: Advancing the International Effort against Climate Change, Washington, DC: Pew Center on Global Climate Change, available at http://www.pewclimate.org/global-warming-indepth/international/working_papers/beyondkyoto.cfm.Google Scholar
Cosbey, Aaron (2008), ‘Border Carbon Adjustment’, background paper for the Trade and Climate Change Seminar, 18–20 June 2008, International Institute for Sustainable Development (IISD), Copenhagen.Google Scholar
Cottier, Thomas and Oesch, Matthias (2005), International Trade Regulation, Law and Policy in the WTO, the European Union and Switzerland, Berne and London: Staempfli Publisher.Google Scholar
Davey, William J. and Joost, Pauwelyn (2000), ‘MFN-Unconditionality: A Legal Analysis of the Concept in View of Its Evolution in the GATT/WTO Jurisprudence with Particular Reference of the Issue of “Like Product”’, in Cottier, Thomas and Mavroidis, Petros C. (eds.), Regulatory Barriers and the Principle of Non-Discrimination in the World Trade Law: Past, Present, and Future, Ann Arbor: University of Michigan Press. pp. 13–50.Google Scholar
Davies, Arwel (2009), ‘Interpreting the Chapeau of GATT Article XX in Light of the “New” Approach in Brazil-Tyres’, Journal of World Trade, 43(3): 507–539.CrossRefGoogle Scholar
De Cendra, Javier (2006), ‘Can Emissions Trading Schemes be Coupled with Border Tax Adjustments? An Analysis vis-à-vis WTO Law’, Review of European Community and International Environmental Law, 15(2): 131–145.CrossRefGoogle Scholar
Demaret, Paul and Stewardson, Raoul (1994), ‘Border Tax Adjustments under GATT and EC Law and General Implications for Environmental Taxes’, Journal of World Trade, 28(4): 5–66.CrossRefGoogle Scholar
Dhar, Biswajit and Das, Kasturi (2009), ‘The European Union's Proposed Carbon Equalization System: Can it be WTO “compatible?”’, Discussion Paper No. 156, New Delhi: Research and Information System for Developing Countries, New Delhi.Google Scholar
Dröge, Susanne, Trabold, Harald, Biermann, Frank, Böhn, Frédéric, and Brohm, Rainer (2004), ‘National Climate Change Policies and WTO Law: A Case Study of Germany's New Policies’, World Trade Review, 3(2): 161–187.CrossRefGoogle Scholar
European Court of Justice (1998), ECJ, Outokumpu Oy vs. Finland (C-213/96), 2 April 1998, ECR 1998 I-1777.Google Scholar
GATT (1970), ‘GATT Working Party on Border Tax Adjustments’, Report of 20 November 1970, L3464, BISD 18 S/97–109.Google Scholar
GATT (1978), EEC – Measures on Animal Feed Proteins, GATT Panel Report, L/4599-25S/49, adopted 14 March 1978.Google Scholar
GATT (1982), US – Prohibition of Imports of Tuna and Tuna Products from Canada, GATT Panel Report, L/5198, BISD 29S/91, adopted 22 February 1982.Google Scholar
GATT (1987), United States – Taxes on Petroleum and Certain Imported Substances, GATT Panel Report (Superfund), L/6175 BISD, 34S/136, adopted 17 June 1987.Google Scholar
GATT (1988a),United States – Taxes on Petroleum and Certain Imported Substances, GATT Panel Report, BISD 34S/136, adopted 17 June 1988.Google Scholar
GATT (1988b), Canada – Measures Affecting Exports of Unprocessed Herring and Salmon, GATT Panel Report, L/6268, BISD 35S/98, adopted 22 March 1988.Google Scholar
GATT (1989), US – Section 337 of the Tariff Act of 1930, GATT Panel Report, L/6439–36S/345, adopted 7 November 1989.Google Scholar
GATT (1990a), EEC – Regulation on Imports of Parts and Components, GATT Panel Report, L/6657 – 37S/132, adopted 16 May 1990.Google Scholar
GATT (1990b), Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes, GATT Panel Report, DS10/R, BISD 37S/200, adopted 7 November 1990.Google Scholar
GATT (1991), US – Restrictions on Imports of Tuna (Tuna I), GATT Panel Report, DS21/R, BISD 39S/155, circulated 16 August 1991, unadopted.Google Scholar
GATT (1994a), US – Restrictions on Imports of Tuna (Tuna II), GATT Panel Report, DS29/R, circulated 20 May 1994, unadopted.Google Scholar
GATT (1994b), US – Taxes on Automobiles, GATT Panel Report, DS31/R, circulated 11 October 1994, unadopted.Google Scholar
Genasci, Matthew (2008), ‘Border Tax Adjustments and Emissions Trading: The Implications of International Trade Law for Policy Design’, Carbon Climate Law Review, 1: 33–42.Google Scholar
Global Ecolabelling Network (GEN) (2003), ‘Trade as an Environmental Policy Tool? Environment as a Trade Policy Tool?’, Ecolabelling and Trade, Global Ecolabelling Network, June 2003, http://www.gen.gr.jp.Google Scholar
Goh, Gavin (2004), ‘The World Trade Organization, Kyoto and Energy Tax Adjustments at the Border’, Journal of World Trade, 38(3): 395–423.Google Scholar
Gros, Daniel and Egenhofer, Christian, Guerinin collaboration with Noriko Fujiwara, Selen Sarisoy in collaboration with Noriko Fujiwara, Selen Sarisoy and Georgiev, Anton (2009), Climate Change and Trade: Taxing Carbon at the Border?, Centre for European Policy Studies (CEPS).Google Scholar
Mirina, Grosz (2011), Sustainable Waste Trade under WTO Law, Leiden/Boston: Martinus Nijhoff Publishers.Google Scholar
Holzer, Kateryna (2010), ‘Proposals on Carbon-Related Border Adjustments: Prospects for WTO Compliance’, Carbon and Climate Law Review, 1: 51–64.Google Scholar
Howse, Robert and Regan, Donald H. (2000), ‘The Product/Process Distinction – an Illusory Basis for Disciplining “Unilateralism” in Trade Policy’, European Journal of International Law, 11(2): 249–289.Google Scholar
Howse, Robert and Eliason, Antonia I. (2009), ‘Domestic and International Strategies to Address Climate Change: An Overwiev of the WTO Legal Issues’, in Cottier, Thomas, Nartova, Olga, and Bigdeli, Sadeq Z. (eds.), International Trade Regulation and the Mitigation of Climate Change, New York: Cambridge University Press, pp. 48–93.Google Scholar
Hudec, Robert E. (2000), ‘The Product-Process Doctrine in GATT/WTO Jurisprudence’, in Bronckers, Marco and Quick, Reinhard (eds.), New Directions in International Economic Law, Essays in Honour of John H. Jackson, The Hague/London/Boston: Springer, pp. 187–217.Google Scholar
Hufbauer, Gary Clyde, Steve, Charnovitz, and Kim, Jisun (2009), Global Warming and the World Trade System, Washington, DC: Peterson Institute for International Economics.Google Scholar
Kommerskollegium (2009), National Board of Trade, ‘Climate Measures and Trade, Legal and Economic Aspects of Border Carbon Adjustments’, http://www.kommers.se.Google Scholar
Marceau, Gabrielle and Trachtman, Joel P. (2002), ‘The Technical Barriers to Trade Agreement, the Sanitary and Phytosanitary Measures Agreement, and the General Agreement on Tariffs and Trade – A Map of the World Trade Organization Law of Domestic Regulation of Goods’, Journal of World Trade, 36(5): 811–881.Google Scholar
Mitsuo, Matsushita, Schoenbaum, Thomas J., and Mavroidis, Petros C. (2006), The World Trade Organization, Law, Practice, and Policy, 2nd edn, Oxford, New York: Oxford University Press.Google Scholar
Oesch, Matthias (2003), ‘Commentary on EC–Asbestos’, International Trade Law Reports, 6: 441–465.Google Scholar
Pauwelyn, Joost (2007), ‘US Federal Climate Policy and Competitiveness Concerns: The Limits and Options of International Trade Law’, Working Paper, NI WP 07-02, Duke University, Durham.CrossRefGoogle Scholar
Pauwelyn, Joost (2009), Statement of Joost Pauwlyn, Testimony Before the Subcommittee on Trade of the House Committee on Ways and Means, US House of Representatives, Washington, DC, 24 March.Google Scholar
Quick, Reinhard and Lau, Christian (2003), ‘Environmentally Motivated Tax Distinctions and WTO Law, the European Commission's Green Paper on Integrated Product Policy in Light of the “Like Product-” and “PPM-” Debates’, Journal of International Economic Law, 6(2): 424–426.CrossRefGoogle Scholar
Regan, Donald H. (2009), ‘How to think about PPMs (and climate change)’, in Cottier, Thomas, Nartova, Olga, and Bigdeli, Sadeq Z. (2009), International Trade Regulation and the Mitigation of Climate Change, Cambridge: Cambridge University Press, pp. 97–123.CrossRefGoogle Scholar
Stephenson, John and Upton, Simon (2009), ‘Competitiveness, Leakage, and Border Adjustment: Climate Policy Distractions?’, OECD Round Table on Sustainable Development, SG/SD/RT(2009)3.Google Scholar
Tarasofsky, Richard G. (2008), ‘Heating Up International Trade Law: Challenges and Opportunities Posed by Efforts to Combat Climate Change’, Carbon Climate Law Review, 1: 7–17.Google Scholar
Thomas, Sébastien (2009), ‘Trade and the Environment under WTO Rules after the Appellate Body Report in Brazil – Retreaded Tyres’, Journal of International Commercial Law and Technology, 4(1): 42–49.Google Scholar
Trebilcock, Micheal J. and Howse, Robert (2005), The Regulation of International Trade, 3rd edn, London/New York: Routledge.Google Scholar
Veel, Paul-Erik. (2009), ‘Carbon Tariffs and the WTO: An Evaluation of Feasible Policies’, Journal of International Economic Law, 12(3): 749–800.CrossRefGoogle Scholar
Vranes, Erich (2009), Trade and the Environment, Fundamental Issues in International Law, WTO Law, and Legal Theory, Oxford/New York: Oxford University Press.Google Scholar
Wiers, Jochem (2002), Trade and Environment in the EC and the WTO, A Legal Analysis, Groningen: Europa Law Publishing.Google Scholar
Wiers, Jochem (2008), ‘French Ideas on Climate and Trade Policies’, Carbon Climate Law Review, 1: 18–32.Google Scholar
Wooders, Peter, Cosbey, Aaron, and Stephenson, John (2009), ‘Border Carbon Adjustment and Free Allowances’, Responding to Competitiveness and Leakage Concerns, OECD Roundtable on Sustainable Development, SG/SD/RT(2009)8.Google Scholar
WTO, (1996), US – Standards for Reformulated and Conventional Gasoline, Panel Report, WT/DS2/R, 29 January 1996.Google Scholar
WTO, (1996a), US – Standards for Reformulated and Conventional Gasoline, Appellate Body Report, WT/DS2/AB/R, 29 April 1996.Google Scholar
WTO, (1996b), Japan – Taxes on Alcoholic Beverages, Appellate Body Report, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, 4 October 1996.Google Scholar
WTO, (1997), Committee on Trade and Environment, Taxes and Charges for Environmental Purposes – Border Tax Adjustment, Note by the Secretariat, WT/CTE/W/47, 2 May 1997.Google Scholar
WTO, (1997a), Taxes and Charges for Environmental Purposes – Border Tax Adjustment, Note by the Secretariat, 2 May 1997, WT/CTE/W/47.Google Scholar
WTO, (1997b), Canada – Certain Measures Concerning Periodicals, Appellate Body Report, WT/DS31/AB/R, 30 July 1997.Google Scholar
WTO, (1997c), European Communities – Regime for the Importation, Sale, and Distribution of Bananas, Appellate Body Report, WT/DS27/AB/R, 25 September 1997.Google Scholar
WTO, (1998), US – Import Prohibition of Certain Shrimp and Shrimp Products, Appellate Body Report, WT/DS58/AB/R, 12 October 1998.Google Scholar
WTO, (2000a), Canada – Certain Measures Effecting the Automotive Industry, Appellate Body Report, WT/DS139,142/AB/R, 19 June 2000.Google Scholar
WTO, (2000b), Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Appellate Body Report, WT/DS169/AB/R, WT/DS161/AB/R, 11 December 2000.Google Scholar
WTO, (2001a), Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Panel Report, WT/DS 161, 169/R, 10 January 2001.Google Scholar
WTO, (2001b), European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, Appellate Body Report, WT/DS135/AB/R, 12 March 2001.Google Scholar
WTO, (2002a), United States – Tax Treatment for ‘Foreign Sales Corporations’, Recourse to Article 21.5 of the DSU by the European Communities, Appellate Body Report, WT/DS/108/AB/RW, 29 January 2002.Google Scholar
WTO, (2002b), GATT/WTO Dispute Settlement Practice Relating to GATT Article XX, Paragraphs (b), (d) and (g), Committee on Trade and Environment, WT/CTE/W/203, 8 March 2002.Google Scholar
WTO, (2004), European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, Panel Report, WT/DS246/R, 20 April 2004.Google Scholar
WTO, (2005), US – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, Appellate Body Report, WT/DS285/AB/R, 7 April 2005.Google Scholar
WTO, (2007a), Brazil – Measures Affecting Imports of Retreaded Tyres, Panel Report, WT/DS332/R, 12 June 2007.Google Scholar
WTO, (2007b), Brazil – Measures Affecting Imports of Retreated Tyres, Report of the Appellate Body, WT/DS 232/AB/R, 17 December 2007.Google Scholar
WTO, (2008), India – Additional and Extra-Additional Duties on Imports from the United States, Appellate Body Report, WT/DS360/AB/R, 17 November 2008.Google Scholar
WTO, (2009a), Trade and Climate Change, WTO-UNEP Report.Google Scholar
WTO, (2009b), ‘Background Note: Trade and Environment in the WTO’, http://www.wto.org/english/news_e/news_09_e/climate_21dec09_e.htm.Google Scholar
WTO, (2010), China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, Appellate Body Report, WT/DS363/AB/R, 19 January 2010.Google Scholar