Trachtman, Joel P. --- "WTO law constraints on carbon credit mechanisms and export border tax adjustments" [2016] ELECD 1464; in Delimatsis, Panagiotis (ed), "Research Handbook on Climate Change and Trade Law" (Edward Elgar Publishing, 2016) 109

Book Title: Research Handbook on Climate Change and Trade Law

Editor(s): Delimatsis, Panagiotis

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781783478439

Section: Chapter 5

Section Title: WTO law constraints on carbon credit mechanisms and export border tax adjustments

Author(s): Trachtman, Joel P.

Number of pages: 10

Abstract/Description:

An attractive response to climate change would be to establish a uniform worldwide greenhouse gas (GHG) (for simplicity of reference, ‘carbon’) tax at the level that would induce the desired reduction of carbon emissions. There are formidable political barriers to reaching an agreement toward this worldwide response, and so it is useful to evaluate a plausible alternative response, involving unilateral national action. Unilateral national action might take the form of: (i) a national carbon tax; or (ii) a national command-and-control system based on carbon permits, combined with a trading facility. However, any purely national system would fail to address collective action problems, and might be highly compromised as an effective system of carbon reduction if leakage occurs due to: (i) imports of high carbon products; or (ii) displacement of exports. These predicted phenomena not only reduce efficacy of carbon reduction, but also undermine political support for a purely national carbon reduction system. Leakage by virtue of imports of high carbon products may be ameliorated by the imposition of taxes or restrictions on imports of high carbon products, or the economic effects of imports of high carbon products may be ameliorated by a system of domestic subsidies to producers competing with these imports. Displacement of exports may be ameliorated by export subsidies.