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What can WTO Law do for Climate Change: Potentials

and Limits

Thomas Cottier

NCCR – Trade Regulation   World Trade Institute, Bern

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Agenda

• The Role of Law in Climate Change • Foundations• Non-discrimination and Taxation• Tariff Policies • Subsidies • Technology Transfer • Government Procurement• Services • Linkage Issues • Conclusions on Research Agenda

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What Brings International Law to the Table?

• Framework: A Principled Approach and Exceptions – Non-discrimination, – Transparency– Response to State Failure (Compensatory Constitutionalism,

Multilayered Governance) • Focus on Procedure (political, judicial)• Dispute Settlement and Enforcement (Sanctions)• Progress Case by Case; Experience • Detailed Regulation Implementing Policies (Constitution

of Markets)

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Pertinent Foundations

• Common Heritage of Mankind (prior to 1992 Rio Conference)

• Permanent Sovereignty of Nation States over Natural Resources affirmed

• The Emerging of Principle of Common Concern beyond National Borders

• The Principle of Precaution• The Principle of Sustainable Development• Progressive Liberalization and Regulation

(WTO)

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Linking Climate Change and Trade Regulation

Adaptation– Agriculture–Trade in Water – Migration–Structural Adjustment–Retraining –Social Security –Insurance–Risk Management

Mitigation– Taxation and Tariffs– Subsidies– Technology Transfer– Energy Services– Financial Services –Gvt. Procurement

• Communication– Freedom of Information and of Speech– Education, Knowledge Transfer – Access to Climate Change related Services

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Impact of Non-Discrimination

• Most Favoured Nation Treatment (Art. I GATT) – Alike Treatment of All 153 Members of the WTO;

exemption of comprehensive preferential trade agreements

• National Treatment (Art. III GATT) – Treatment no less favourable of imported like and

substituting products– Subject to exemptions in particular for the protection

of non-renewable resources, including air and climate (US - Gasoline)

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Border Tax Adjustment

• GATT II:2 (a) allows for BTA not in excess of an internal tax on a product or a tax on input articles

• Key issues: Can tax go beyond BTA? Can product be distinguished on the basis of Production and Process Methods) ?

• GATT in principle allows for an adjustment for a tax on ‘certain chemicals’ used in the process of producing products the polluting effect of which happened abroad (US – Superfund)

• Differential Treatment on the basis of PPM can be justified for the protection of global commons (Art. XX(g) GATT, subject to conditions

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Tariffs • Tariffs in WTO main Lawful Instrument of Protection• Tariff Reduction in Industrial Goods reduced on average

from 40% to 4 %; agriculture: >20%)• Consolidation and Bound Tariffs • Unilateral Deconsolidation and Compensation • Issues:

– Should we use tariffs to achieve a level playing in climate mitigation?

– Should tariffs be deconsolidated and imposed on the basis of CO2 emission standards of products, and PPMs?

– Multilateral negotiations, unilateral or bilateral approach? – How to compensate sectoral increases?

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Subsidies • Do the WTO Agreement on Subsidies and

Countervailing Duties and the Agreement on Agriculture allow for climate-friendly subsidies? -- Kyoto 2.1.a (iv):– Subsidies for energy conservation– Subsidies for RE production or consumption – Subsidies for R&D grants for climate technologies – Subsidies for carbon capture & storage

• Kyoto 2.1 subsidies are not excluded by WTO (actionable subsidies – yellow light)

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Technology Transfer

• Art 66.2 Agreement on Intellectual Property (TRIPs) – LDC’s technology transfer obligation

• Multilateral Environmental Agreements have weak technology transfer obligations

• Clean Development Mechanism (CDM): incentive for technology transfer

• Incentives schemes for knowledge transfer required (tax reductions v. export subsidy)

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Government Procurement

• Agreement on Government Procurement (GPA) allows to condition Purchases on Ecology and arguably PPMs (Product Specification)

• National Treatment and Equal Opportunity

• Transparency Requirements

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Energy Services

• Enhancing Energy Efficiency by competing Energy Suppliers

• Enhancing Market Access for foreign Service Suppliers

• Restriction of Monopolies • Regulation of Public Services • Reform of GATS Commitments for Energy

Services required • Review of Russia’s Terms of Accession

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Financial Services

• Enhanced Market Access (National Treatment) for global System of Emission Certificates Trading Required?

• Implications for Financial Liberalization and Regulation in GATS?

• Implications for Domestic Regulation under GATS?

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Environmental Goods & Services Negotiations

• Doha Declaration: With a view to enhancing the mutual

supportiveness of trade and environment, we agree to negotiations, without prejudging their outcome:

…..

(iii) The reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.

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The Environmental Area Initiative (EIA) Approach

• Multilaterally agreed environmental area

• Services, goods incl. EPPs, TBTs, IPRs, domestic regulation and other areas

• Goals and targets may be adopted from Millennium Development Goals (MDGs), MEAs, and other international agreements

• Result in binding WTO commitments (GATT and GATS)

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Institutional Challenges

• Decision-making processes: – Dual approach of ongoing negotiations and

market access rounds– consensus no longer suitable: weighted

voting? (highly controversial)

• Interface of WTO and MEAs including Kyoto II unsettled: Integration into WTO via reference?

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Conclusions

• Precaution Justifies Taking Action against CO2 Emissions

• Interdisciplinary Research Primarily based upon Empirical Analysis

• Prospective Models need to take Legal Framework into Account

• Development of Detailed Rules for Implementation

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Thank you for your attention!