What can WTO Law do for Climate Change: Potentials and Limits

1. What can WTO Law do for Climate Change: Potentials and Limits Thomas Cottier NCCR – Trade Regulation World Trade Institute, Bern

2. Agenda • The Role of Law in Climate Change • Foundations • Non-discrimination and Taxation • Tariff Policies • Subsidies • Technology Transfer • Government Procurement • Services • Linkage Issues • Conclusions on Research Agenda

3. What Brings International Law to the Table? • Framework: A Principled Approach and Exceptions • Non-discrimination, • Transparency • Response to State Failure (Compensatory Constitutionalism, Multilayered Governance) • Focus on Procedure (political, judicial) • Dispute Settlement and Enforcement (Sanctions) • Progress Case by Case; Experience • Detailed Regulation Implementing Policies (Constitution of Markets)

4. Pertinent Foundations • Common Heritage of Mankind (prior to 1992 Rio Conference) • Permanent Sovereignty of Nation States over Natural Resources affirmed • The Emerging of Principle of Common Concern beyond National Borders • The Principle of Precaution • The Principle of Sustainable Development • Progressive Liberalization and Regulation (WTO)

5. Linking Climate Change and Trade Regulation

6. Impact of Non-Discrimination • Most Favoured Nation Treatment (Art. I GATT) • Alike Treatment of All 153 Members of the WTO; exemption of comprehensive preferential trade agreements • National Treatment (Art. III GATT) • Treatment no less favourable of imported like and substituting products • Subject to exemptions in particular for the protection of non-renewable resources, including air and climate (US - Gasoline)

7. 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 • Key issues: Can tax go beyond BTA? Can product be distinguished on the basis of Production and Process Methods) ? • GATT in principleallows for an adjustment for a tax on ‘certain chemicals’ used in the process of producing products the polluting effect of which happened abroad (US – Superfund) • Differential Treatment on the basis of PPM can be justified for the protection of global commons (Art. XX(g) GATT, subject to conditions

8. Tariffs • Tariffs in WTO main Lawful Instrument of Protection • Tariff Reduction in Industrial Goods reduced on average from 40% to 4 %; agriculture: >20%) • Consolidation and Bound Tariffs • Unilateral Deconsolidation and Compensation • Issues: • Should we use tariffs to achieve a level playing in climate mitigation? • Should tariffs be deconsolidated and imposed on the basis of CO2 emission standards of products, and PPMs? • Multilateral negotiations, unilateral or bilateral approach? • How to compensate sectoral increases?

9. Subsidies • Do the WTO Agreement on Subsidies and Countervailing Duties and the Agreement on Agriculture 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 WTO (actionable subsidies – yellow light)

10. Technology Transfer • Art 66.2 Agreement on Intellectual Property (TRIPs) – LDC’s technology transfer obligation • Multilateral Environmental Agreements have weak technology transfer obligations • Clean Development Mechanism (CDM): incentive for technology transfer • Incentives schemes for knowledge transfer required (tax reductions v. export subsidy)

11. Government Procurement • Agreement on Government Procurement (GPA) allows to condition Purchases on Ecology and arguably PPMs (Product Specification) • National Treatment and Equal Opportunity • Transparency Requirements

12. Energy Services • Enhancing Energy Efficiency by competing Energy Suppliers • Enhancing Market Access for foreign Service Suppliers • Restriction of Monopolies • Regulation of Public Services • Reform of GATS Commitments for Energy Services required • Review of Russia’s Terms of Accession

13. Financial Services • Enhanced Market Access (National Treatment) for global System of Emission Certificates Trading Required? • Implications for Financial Liberalization and Regulation in GATS? • Implications for Domestic Regulation under GATS?

14. Environmental Goods & Services Negotiations • Doha Declaration: 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.

15. 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 Millennium Development Goals (MDGs), MEAs, and other international agreements • Result in binding WTO commitments (GATT and GATS)

16. Institutional Challenges • Decision-making processes: • Dual approach of ongoing negotiations and market access rounds • consensus no longer suitable: weighted voting? (highly controversial) • Interface of WTO and MEAs including Kyoto II unsettled: Integration into WTO via reference?

17. Conclusions • Precaution Justifies Taking Action against CO2 Emissions • Interdisciplinary Research Primarily based upon Empirical Analysis • Prospective Models need to take Legal Framework into Account • Development of Detailed Rules for Implementation

18. Thank you for your attention!