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What can WTO Law do for Climate Change Mitigation: Potentials and Limits Thomas Cottier Sadeq Bigdeli Olga Nartova Sofya Berkutova NCCR – Trade Regulation IP6 Project on Energy in WTO Law and Policy World Trade Institute, Bern 1 Agenda • • • • • • Tariff Issues Border Tax Adjustment Subsidies TRIPS Energy Services Potential of EGS Negotiations 2 Tariffs • A new function for tariffs to achieve level playing fields? – How to define environmentally non-friendly goods? (How to link tariffs with emissions?) – Would this be allowed under GATT XX (b) or (g) or the TBT (necessity test)? • How to avoid sheer protectionism? – or should Article XXVIII procedure be sought? 3 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 • GATT superfund in principle allowed for an adjustment for a tax on ‘certain chemicals’ used in the process of producing products the polluting effect of which happened abroad (a PPM-based tax?) • However, the AB may find a violation of Article III (Alcohol cases and likeness issue) raising the question of permissibility under ‘general exceptions’. 4 Production Process Methods • Trade and environment debate • Did the AB on Shrimp give a carte blanche for PPM-based measures? • Article III national treatment violation to be justified under GATT XX? – Implication: burden of proof shifted to the importing country – Back to aims and effect? 5 Industrial Subsidies: ASCM Disciplines • Prohibited subsidies: – export subsidies and importsubstitution subsidies • Actionable subsidies: all ‘specific’ subsidies if they cause ‘adverse effect’ • Non-actionable: expired in 1999 – limited R&D, Environmental subsidies and regional subsidies 6 Agricultural Subsidies: Agreement on Agriculture Domestic Support 1) Export subsidies (Article 9) Trade distortive (Commitment levels) 2) Domestic support: – Amber Box – Blue Box – Green Box Reduce distortion (production-limiting programme) Zero/minimal distortion Images source: WTO 7 Potential Constraints of Subsidies • Do the ASCM and AoA 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 ASCM (actionable subsidies – yellow light) • Reviving the green light category (non actionable subsidies) in the ASCM agreement? 8 WTO and (post)-Kyoto Coherence • Kyoto 2.1.a (v): “Progressive reduction or phasing out of … subsidies in all greenhouse gas emitting sectors that run counter to the objective of the Convention…” • High political sensitivity: – Developed countries: linked to energy security (and vested interest: Bush’s veto threat) – Developing countries: energy consumption subsidies are a major source of CO2 emissions 9 TRIPs and Climate Change • Art 66.2 TRIPS – LDC’s technology transfer obligation (“shall”) • MEAs weak technology transfer obligations • CDM: incentive for technology transfer • Incentives schemes for knowledge transfer required (tax reductions v. export subsidy) 10 Energy Services • Liberalization of services, energy efficiency and environment – a triple win agenda • UR insufficient classification in the field of energy • New classification proposals and climate change: – promotion of cleaner energy - less CO2 emissions – harmonisation of standards - common energy efficiency thresholds 11 Energy and Environmental Services • Both have influence on efficiency of climate change mitigation measures • Both underwent structural reform and open to private operators • Both need more appropriate classification under GATS • Both imply considerable investment • For both the issue of public service is crucial 12 EGS Negotiation - Art. 31(iii) DDA • 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. 13 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 Millenium Development Goals (MDGs), MEAs, and other international agreements • Result in binding WTO commitments (GATT and GATS) 14 (1) Possible Target Areas and Clusters • • • • Supply of drinking water Drainage Sanitation and disposal of sewage Waste disposal, in particular hazardous waste • Reduction of carbon emission • Promotion of renewable energies, in particular water, solar, wind and tidal 15 (2) Modalities within an Environmental Area • Members may negotiate any of the following – Definition of relevant services and scheduling – minimum number of relevant goods subject to mandatory reduction (sectoral initiative) • Tariff elimination on relevant goods • an overall average tariff cut with minimum cuts at tariff line level • minimum number of goods with minimum tariff cut • Separate modalities for EPPs where reductions will be mandatory • Coordination across negotiating 16 (3) Drafting an EGS Framework Agreement • Framework and modalities for undertaking commitments • Linkages with existing commitments and scheduling • Issues relevant to the environmental sector (technology transfer, TBTs, IPRs, etc) • Provisions on transparency, notification, and dispute settlement 17 Linking EGS Negotiations and Climate Change • Sectors covered by Kyoto Protocol may provide specific environmental areas and targets; may adopt from other parallel initiatives, e.g. Global Environment Facility • Under the Kyoto Protocol, Members can unilaterally define priorities and seek CDM projects within the given structure of service regulations, tariff and NTBs relating to corresponding products • EAI approach offers a basis and methodology to do this multilaterally • Members can decide on the selection and prioritization of above project areas for inclusion in EGS negotiations 18 Thank you for your attention! 19