Overview of Kyoto-Trade Rules Interactions

Aaron Cosbey Associate, Climate Change and Energy, IISDClimate Change, Trade and Competitiveness

COP 11/MOP 1 Side Event, Dec. 3, 2005

• Two bodies of international law, potential for conflict.

• No conflict has ever arisen, so this is a scoping exercise in prophylactic analysis.

The Context

• Use of tariffs, trade barriers: probably illegal, but also unlikely

• Use of carbon taxes combined with border tax adjustment: could be a problem. No legal consensus on this.

• Technically nothing is GATT-illegal if it can be saved by the Exceptions – Art. XX. This is the wildcard.

The GATT

• Subsidies for preferable production, R&D (e.g., biofuels, PV solar): no domestic preferences, no specific enterprises

• Emissions trading: careful with initial allocation – must reflect market value

• CDM: only an issue if unilateral CDM, government subsidizes and aims subsidies only at domestic investors.

Subsidies Agreement (SCM)

• Technical Barriers to Trade: eco-labelling, energy standards – voluntary labeling probably OK; Standards either based on international standards, or must justify why not

• Government Procurement: as long as no discrimination involved, probably OK. (may be saved by Art. XXIII Exception anyway)

• Dispute settlement: where does the dispute go if there is one?

• EU GSP conditionalities: uncertain legality.

Other WTO Agreements

• Environmental Gods and Services negotiations: – list some goods as “environmental” – specify CDM use as one defining characteristic.

• Subsidies Agreement Article 8 Exceptions: can they be revived?

Possible Synergies

• In most cases, all that is required to avoid conflict is careful design (BTA might be the exception)

• There are important areas of potential synergy – need to be actively pursued

Conclusions

Thank you

Aaron Cosbeyacosbey@iisd.ca

www.iisd.org/climatewww.iisd.org/trade

TRADE, COMPETIVENESS AND CLIMATE CHANGE: Exploring the Issues

December, 2005 Montreal, Canada