Zhang, ZhongXiang (2009): The U.S. proposed carbon tariffs, WTO scrutiny and China's responses.
This is the latest version of this item.
Download (212kB) | Preview
With countries from around the world set to meet in Copenhagen to try to hammer out a post-2012 climate change agreement, no one would disagree that a U.S. commitment to cut greenhouse gas emissions is essential to such a global pact. However, despite U.S. president Obama’s recent announcement that he will push for a commitment to cut U.S. greenhouse gas emissions by 17% by 2020, in reality it is questionable whether U.S. Congress will agree to specific emissions cuts, although are not ambitious at all from the perspectives of both the EU and developing countries, without imposing carbon tariffs on Chinese products to the U.S. market, even given China’s own recent announcement to voluntarily seek to reduce its carbon intensity by 40-45% over the same period.
This dilemma is partly attributed to flaws in current international climate negotiations, which have been focused on commitments on the two targeted dates of 2020 and 2050. However, if the international climate change negotiations continue their current course without extending the commitment period to 2030, which would really open the possibility for the U.S. and China to make the commitments that each wants from the other side, the inclusion of border carbon adjustment measures seems essential to secure passage of any U.S. legislation capping its greenhouse gas emissions. Moreover, the joint WTO-UNEP report indicates that border carbon adjustment measures might be allowed under the existing WTO rules, depending on specific design features and conditions for implementing them.
Against this background, this paper argues that, on the U.S. side, there is a need to minimize the potential conflicts with WTO provisions in designing such border carbon adjustment measures. The U.S. also needs to explore with its trading partners cooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at an international level. Moreover, to increase the prospects for a successful WTO defence of the Waxman-Markey type of border adjustment provision, 1) there should be a period of good faith efforts to reach agreements among the countries concerned before imposing such trade measures; 2) WTO consistency also requires considering alternatives to trade provisions that could be reasonably expected to fulfill the same function but are not inconsistent or less inconsistent with the relevant WTO provisions; and 3) trade provisions should allow importers to submit equivalent emission reduction units that are recognized by international treaties to cover the carbon contents of imported products.
Being targeted by such border carbon adjustment measures, China needs to, at a right time, indicate a serious commitment to address climate change issues to challenge the legitimacy of the U.S. imposing the carbon tariffs by signaling well ahead that it will take on binding absolute emission caps around the year 2030, and needs the three transitional periods of increasing climate obligations before taking on absolute emissions caps. The paper argues that there is a clear need within a climate regime to define comparable efforts towards climate mitigation and adaptation to discipline the use of unilateral trade measures at the international level. As exemplified by export tariffs that China applied on its own during 2006-08, the paper shows that defining the comparability of climate efforts can be to China’s advantage. Furthermore, given the fact that, in volume terms, energy-intensive manufacturing in China values 7-8 times that of India, and thus carbon tariffs impact much more on China than on India, the paper questions whether China should hold the same stance on this issue as India as it does now, although the two largest developing countries should continue to take the same positions on other key issues in international climate change negotiations.
|Item Type:||MPRA Paper|
|Original Title:||The U.S. proposed carbon tariffs, WTO scrutiny and China's responses|
|Keywords:||Post-2012 climate negotiations; Border carbon adjustments; Carbon tariffs; Emissions allowance requirements; Cap-and-trade regime; Lieberman-Warner bill; Waxman-Markey bill; World Trade Organization; Kyoto Protocol; China; United States|
|Subjects:||F - International Economics > F1 - Trade > F18 - Trade and Environment
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
|Depositing User:||ZhongXiang Zhang|
|Date Deposited:||08. Dec 2009 07:22|
|Last Modified:||27. Mar 2015 01:20|
Berger, J.R. (1999), Unilateral Trade Measures to Conserve the World’s Living Resources: An Environmental Breakthrough for the GATT in the WTO Sea Turtle Case, Columbia Journal of Environmental Law, Vol. 24, pp. 355-411.
Bhagwati, J. and P.C. Mavroidis (2007), Is Action against US Exports for Failure to Sign Kyoto Protocol WTO-Legal?, World Trade Review, Vol. 6, No. 2, pp. 299-310.
Bounds, A. (2006), EU Trade Chief to Reject ‘Green’ Tax Plan, Financial Times, December 17, Available at: http://www.ft.com/cms/s/0/9dc90f34-8def-11db-ae0e-0000779e2340.html?nclick_check=1.
Bovenberg, A.L. and L.H. Goulder (2002), Addressing Industry-Distributional Concerns in U.S. Climate Change Policy, Unpublished manuscript, Department of Economics, Stanford University.
Broder, J. (2009), Obama Opposes Trade Sanctions in Climate Bill, New York Times, June 28, Available at: http://www.nytimes.com/2009/06/29/us/politics/29climate.html?_r=2&scp=1&sq=obama%20opposes%20trade%20sanctions&st=cse.
Charnovitz, S. (2003), Trade and Climate: Potential Conflicts and Synergies, in Pew Center on Global Climate Change, Beyond Kyoto – Advancing the International Effort Against Climate Change, pp. 141-170.
Department of Economic and Social Affairs of the United Nations (UNDESA, 2009), World Population Prospects: The 2008 Revision, Available at: http://esa.un.org/unpp.
Doyle, A. (2009), U.S. Praises China’s Climate Efforts; Urges More, Reuters, Available at: http://www.reuters.com/article/environmentNews/idUSTRE52S1WP20090329.
Dröge, S. (with 15 contributing authors) (2009), Tackling Leakage in a World of Unequal Carbon Prices, Synthesis Report, Climate Strategies, Cambridge, United Kingdom.
EIA (2004), International Energy Outlook 2004, U.S. Energy Information Administration (EIA), Washington, DC.
EIA (2009), International Energy Outlook 2009, DOE/EIA-0484(2009), U.S. Energy Information Administration (EIA), Washington, DC, May 27, Available at: http://www.eia.doe.gov/oiaf/ieo/.
European Commission (2008), Proposal for a Directive of the European Parliament and of the Council Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading System of the Community, COM(2008) 16 final, Brussels.
Genasci, M. (2008), Border Tax Adjustments and Emissions Trading: the Implications of International Trade Law for Policy Design, Carbon and Climate Law Review, Vol. 2, No. 1, pp. 33-42.
General Agreement on Tariffs and Trade (GATT, 1987), United States – Taxes on Petroleum and Certain Imported Substances, Report of the Panel, Adopted on June 17, L/6175, BISD 34S/136, Geneva, Available at: http://www.wto.org/english/res_e/booksp_e/analytic_index_e/introduction_01_e.htm.
General Agreement on Tariffs and Trade (GATT, 1990), Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes, Report of the Panel, DS10/R, Adopted on November 7, BISD 37S/200, Geneva, Available at: http://www.wto.org/english/res_e/booksp_e/analytic_index_e/introduction_01_e.htm.
General Agreement on Tariffs and Trade (GATT, 1994), United States: Restrictions on the Imports of Tuna, Report of the Panel (not adopted), DS29/R, June 16, Geneva, Available at: http://www.wto.org/english/res_e/booksp_e/analytic_index_e/introduction_01_e.htm.
Haverkamp, J. (2008), International Aspects of a Climate Change Cap and Trade Program, Testimony before the Committee on Finance, U.S. Senate, February 14, Available at: http://finance.senate.gov/hearings/testimony/2008test/021408jhtest.pdf.
Hollinger, P. (2009), Sarkozy Renews Carbon Tax Call, Financial Times, September 11, p. 5.
IEA (2007), World Energy Outlook 2007, International Energy Agency (IEA), Paris.
Ismer, R., and K. Neuhoff (2007), Border Tax Adjustment: A Feasible Way to Support Stringent Emission Trading, European Journal of Law and Economics, Vol. 24, No. 2, pp. 137-164.
McBroom, M. (2008), How the IBEW-UWM-Boilermakers-AEP International Proposal Operates within Climate Legislation, June 17, Available at: http://www.wita.org/index.php?tg=fileman&idx=viewfile&idf=189&id=4&gr=Y&path=&file=WITA-+Climate+Change+-+Overview+of+IBEW-AEP+Proposal+(June+17%2C+2008).pdf.
Ministry of Commerce of China (MOC of China, 2009), A Statement on “Carbon Tariffs”, July 3, Beijing, Available at: http://www.mofcom.gov.cn/aarticle/ae/ag/200907/20090706375686.html, (in Chinese).
Morris, M.G. and E.D. Hill (2007), Trade is the Key to Climate Change, The Energy Daily, Vol. 35, No. 33, February 20.
National Bureau of Statistics of China (2008), China Statistical Yearbook 2008, China Statistics Press, Beijing.
Parry, Ian W.H., Williams III, R.C. and L.H. Goulder (1999), When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets, Journal of Environmental Economics and Management, Vol. 37, No. 1, pp. 52-84.
Reinaud, J. (2008), Issues behind Competitiveness and Carbon Leakage: Focus on Heavy Industry, IEA Information Paper, IEA/OECD, October, Paris.
Reuters (2009), China Says “Carbon Tariffs” Proposals Breach WTO Rules, New York Times, July 3, Available at: http://www.nytimes.com/reuters/2009/07/03/world/international-uk-china-climate.html?ref=global-home.
Samuelsohn, D. (2007), Trade Plan Opposed by China, Brazil and Mexico, Greenwire, September 26, Available at: http://www.earthportal.org/news/?p=507.
Swedish National Board of Trade (2004), Climate and Trade Rule – Harmony or Conflict?, Stockholm. Talley, I. (2009), Senate to Put Off Climate Bill Until Spring, Wall Street Journal, November 18, Available at: http://online.wsj.com/article/SB125850693443052993.html.
The Economist (2008), Pollution Law: Trading Dirt, June 7, pp. 42-44.
Wang, X. and T. Voituriez (2009), Can Unilateral Trade Measures Significantly Reduce Leakage and Competitiveness Pressures on EU-ETS-Constrained Industries? The Case of China Export taxes and VAT Rebates, Working Paper, Climate Strategies, Cambridge, United Kingdom.
Werksman, J. and T. Houser (2008), Competitiveness, Leakage and Comparability: Disciplining the Use of Trade Measures under a Post-2012 Climate Agreement, Discussion Paper, World Resources Institute, December, Washington, DC.
World Trade Organization (WTO, 1998), United States – Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body, WT/DS58/AB/R, Geneva.
World Trade Organization (WTO, 2001), United States – Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, Panel Report, WT/DS58/RW, Adopted on November 21,Geneva.
World Trade Organization (WTO) and United Nations Environment Programme (UNEP) (2009), Trade and Climate Change: WTO-UNEP Report, Geneva.
Zhang, Z.X. (1997), The Economics of Energy Policy in China: Implications for Global Climate Change, New Horizons in Environmental Economics Series, Edward Elgar.
Zhang, Z.X. (1998), Greenhouse Gas Emissions Trading and the World Trading System, Journal of World Trade, Vol. 32, No. 5, pp. 219-239.
Zhang, Z.X. (1999), Should the Rules of Allocating Emissions Permits be Harmonised?, Ecological Economics, Vol. 31, No. 1, pp. 11-18.
Zhang, Z.X. (2000), Can China Afford to Commit itself an Emissions Cap? An Economic and Political Analysis, Energy Economics, Vol. 22, No. 6, pp. 587-614.
Zhang, Z.X. (2004), Open Trade with the U.S. without Compromising Canada’s Ability to Comply with its Kyoto Target, Journal of World Trade, Vol. 38, No. 1, pp. 155-182.
Zhang, Z.X. (2007a), Doing Trade and Climate Policy Together, in Najam, A., Halle, M. and R. Meléndez-Ortiz (Editors), Trade and Environment: A Resource Book, International Institute for Sustainable Development, Canada, and International Center for Trade and Sustainable Development, Geneva.
Zhang, Z.X. (2007b), Why Has China not Embraced a Global Cap-and-Trade Regime?, Climate Policy, Vol. 7, No. 2, pp. 166-170.
Zhang, Z.X. (2008), Asian Energy and Environmental Policy: Promoting Growth While Preserving the Environment, Energy Policy, Vol. 36, pp. 3905-3924.
Zhang, Z.X. (2009a), Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO?, Energy Policy, Vol. 37, pp. 5105-5112.
Zhang, Z.X. (2009b), 美国拟征收碳关税 中国当如何应对 (How Should China Respond to the U.S. Proposed Carbon Tariffs?),《国际石油经济》International Petroleum Economics, Vol. 17, No. 8, pp. 13-16.
Zhang, Z.X. (2009c), Is China a Christmas Tree to Hang Everybody’s Complaints? Putting its Own Energy-Saving into Perspective, Energy Economics, forthcoming, doi:10.1016/S0140-9883(03)00042-2.
Zhang, Z.X. and L. Assunção (2004), Domestic Climate Policy and the WTO, The World Economy, Vol. 27, No. 3, pp. 359-386.
Available Versions of this Item
The U.S. proposed carbon tariffs, wto scrutiny and China's reponses. (deposited 04. Dec 2009 23:21)
- The U.S. proposed carbon tariffs, WTO scrutiny and China's responses. (deposited 08. Dec 2009 07:22) [Currently Displayed]