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Trade Law, Climate Diplomacy

Trade Law, Climate Diplomacy. To what extent is trade law a constraint on climate or clean energy policies?. Trade Rules. Core rules come from World Trade Organization NAFTA very similar basic principle: non-discrimination (national treatment)

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Trade Law, Climate Diplomacy

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  1. Trade Law, Climate Diplomacy

  2. To what extent is trade law a constraint on climate or clean energy policies?

  3. Trade Rules • Core rules come from World Trade Organization • NAFTA very similar • basic principle: non-discrimination (national treatment) • Clear environmental/health exceptions (NAFTA Article 2101 – Similar Provisions in Article XX of WTO) • Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures… • (b) necessary to protect human, animal or plant life or health… • (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

  4. national treatment, environmental exemptions • constraints on use of imports bans • modest increase in evidentiary burden • dispute settlement decisions suggest wide latitude (asbestos) • NAFTA investor suits: potential problem

  5. WTO – Emerging Principles Hoberg, Journal of Comparative Policy Analysis (2001): 191-217. 1. Regulations that have trade implications have been successfully defended so long as they are clearly related to achieving the environmental goal. 2. If the design of the program contains any distinctions between foreign and domestic entities, the distinction must be clearly related to achieving environmental goals. 3. Trade measures such as import bans are highly suspect. Trade measures may be justifiable to protect "global commons" issues. To be justified, trade measures must be implemented transparently, and be a last resort after negotiated solutions have been exhausted. They must be results-oriented and responsive to different international conditions, and not compel compliance to technology-specific standards.

  6. WTO – Emerging Principles (cont) 4. Process-related measures are suspect, but have not recently been tested. The Tuna-Dolphin cases, never formally adopted by GATT or the WTO, were clearly hostile to them, but the Shrimp-Turtle cases suggest a much more open-minded approach. There is no basis for the product/process distinction in the text of the agreement, and some non-environmental decisions have made room for process-oriented standards. 5. Regulations more stringent than international standards that have trade impacts cannot be justified without scientific support for an "ascertainable risk." 6. Countries have the right to select their own appropriate level of risk, including zero risk. 7. Risk assessments have to be relatively formalized, and bear a rational relation to the measure. But they do not have to be quantified.

  7. Border Carbon Adjustment • Issue: how to minimize competitiveness impacts on domestic producers in progressive climate policy jurisdiction • Solution: apply border tax • Does not violate WTO (see national treatment)

  8. Local Content Requirements • Issue: can green energy policies be used to foster local clean energy industry • Solution: specific some fraction of components or services be local content • Violation of WTO

  9. Local Content Requirements – Cases • Ontario FIT • Wind projects of >10kW must use 50% domestic content • Solar projects must use 60% domestic content • EU, Japan have challenged • 2012 - WTO declared it a violation • Canada appealing • China wind program requirements for local content • US initiated WTO process, China voluntarily changed policy

  10. Why have international negotiations on climate been so unsuccesful?

  11. History • IPCC established in 1988 • United Nations Framework Convention on Climate Change (UNFCC) • Meetings are conference of parties (COPn) – Doha meeting was COP 18 • 1992 – “limiting…emissions…by the end of the present decade to earlier levels” • Established standard of avoiding “dangerous anthropogenic interference in the climate system”

  12. Kyoto Protocol - 1997 • Annex I nations took on commitments to reduce emissions by 2008-2012 • US – 7% below 1990 levels • Canada 6% below 1990 levels • Annex II nations had no commitment – • Principle: common but differentiated responsibility

  13. Current status • Copenhagen – COP 15 – failed to produce new agreement – non-binding commitments • You can see pledges here • Durban + Doha – COP 17-18 – agreed to continue negotiation with goal of reaching binding agreement by 2020

  14. Main Barriers – Victor, Global Warming Gridlock • Universal Membership with consensus rules • Each country has a veto • “law of least ambitious program”

  15. Main Barriers – Victor, Global Warming Gridlock • Target and timetables misguided • Legally binding aspiration questionable • No real enforcement mechanism

  16. Proposed solutions • Narrow range of emitters • Top 6 = 64% • Top 12 = 74% • To get to 84%, need top 22 • Recommendation: top dozen emitters plus Brazil and Indonesia for land use • Work through credible aspirational commitments • shaming

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