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Beyond Kyoto Trade and Climate: Potential Conflicts and Synergies

Beyond Kyoto Trade and Climate: Potential Conflicts and Synergies. Prepared for the Pew Center on Global Climate Change by Steve Charnovitz. Relationship between trade and climate change. Positive interactions Free trade promotes economic growth

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Beyond Kyoto Trade and Climate: Potential Conflicts and Synergies

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  1. Beyond KyotoTrade and Climate:Potential Conflicts and Synergies Prepared for the Pew Center on Global Climate Change by Steve Charnovitz

  2. Relationship between trade and climate change • Positive interactions • Free trade promotes economic growth • More resources and public support for environmental protection • Free trade promotes efficiency • Fewer resources wasted • Examples • Reducing energy subsidies good from both a free trade and a climate perspective • Trading emission allowances reduces climate mitigation costs • Free trade promotes technology diffusion

  3. Relationship between trade and climate change • Negative interactions • Free trade promotes economic growth > higher emissions • Free trade undermines ability of national governments to regulate: race to the bottom

  4. Are national and international climate change policies consistent with WTO rules? Main issues • WTO consistency/ • permissibility of: • Domestic climate policies (carbon taxes, efficiency standards and emission trading systems)? • International climate policies (e.g., CDM)? • Trade measures against countries that are not taking action on climate change

  5. Are national and international climate change policies consistent with WTO rules? How to promote greater harmony between trade and climate change regimes? Main issues • Examples: • EU Parliament called for new initiatives to prevent non-parties from “obtaining unfair competitive advantages” • Venezuela: Kyoto implementation could run afoul of trade rules • Saudi Arabia: countries could use climate policies to protect domestic interests

  6. World Trade Organization (WTO) • Founded in 1995; 146 members • Umbrella agreement + 17 subsidiary agreements • General Agreement on Tariffs and Trade (GATT) • Technical Barriers to Trade (TBT) • General Agreement on Trade in Services (GATS) • Agreement on Subsidies and Countervailing Measures (SCM) • Dispute settlement understanding (DSU) • Two levels: panels and appellate body • Decisions ordinarily binding • Sanctions: authorization of self-help by victim state

  7. Basic GATT rules • Basic limitations • No quantitative restrictions (quotas, trade bans) (GATT art. XIII) • National treatment and most-favored nation treatment (GATT art. III, I) • No discrimination against imported products, or products from one country versus another • Must treat “like products” alike • Issue: what products are “like”? • Environmental exceptions (GATT art. XX(b), (g)) • Domestic measures ok • If necessary to protect human, animal or plant life • If related to conservation of exhaustible natural resources

  8. Domestic climate change policies I:Taxes • Examples • Fuel economy tax • Is tax on gas guzzling cars ok? • Fuel carbon tax • Can a country tax coal and natural gas differently, based on carbon content? • Process-based electricity tax • Can a country tax electricity generated from coal and from renewables differently? • Issues: • Are these “like products”? • If like products, can differential treatment be justified under Article XX?

  9. Domestic climate change policies II: Regulations • Examples • Fuel economy regulations • Climate-friendly labeling: e.g., GHGs emitted to produce the product • Issues • GATT: Are these “like” products? • TBT Agreement: Preference for international standards

  10. International climate policies • Emissions trading • Is international emissions trading subject to WTO rules? • Are AAUs, CERs, ERUs “goods” or “services”? • CDM • Could climate regime disqualify operating entities and project developers from non-Kyoto parties? • Clean energy export credits • Could climate regime provide credits for exports of “clean energy” to non-Kyoto parties?

  11. Trade measures • Defensive national policies to protect competitiveness • Examples • Duties/tariffs on states that don’t have strong climate policies • Border tax adjustments • Multilateral trade measures • Examples • Trade controls on non-parties to encourage participation • Trade controls as a sanction for non-compliance • Issues • Deference of WTO to MEAs? • Justification under Article XX exceptions?

  12. Promoting synergies • Catalyzing international standards • Facilitating taxes on energy • Opening markets for environmental goods and services • Eliminating harmful energy subsidies • Safeguarding eco-labeling • Improving trade and climate regime coordination

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