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


Agenda: Agenda Tariff Issues Border Tax Adjustment Subsidies TRIPS Energy Services Potential of EGS Negotiations


Tariffs : 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?


Border Tax Adjustment: 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’.


Production Process Methods: 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?


Industrial Subsidies: ASCM Disciplines: Industrial Subsidies: ASCM Disciplines Prohibited subsidies: export subsidies and import- substitution subsidies Actionable subsidies: all ‘specific’ subsidies if they cause ‘adverse effect’ Non-actionable: expired in 1999 limited R&D, Environmental subsidies and regional subsidies


Agricultural Subsidies:Agreement on Agriculture : Agricultural Subsidies: Agreement on Agriculture 1) Export subsidies (Article 9) 2) Domestic support: Amber Box Blue Box Green Box Domestic Support Reduce distortion (production-limiting programme) Trade distortive (Commitment levels) Zero/minimal distortion Images source: WTO


Potential Constraints of Subsidies : 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?


WTO and (post)-Kyoto Coherence: 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


TRIPs and Climate Change: 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)


Energy Services : 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


Energy and Environmental Services: 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


EGS Negotiation - Art. 31(iii) DDA: 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.


The Environmental Area Initiative (EIA) Approach : 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)


Possible Target Areas and Clusters: 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


(2) Modalities within an Environmental Area : (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


(3) Drafting an EGS Framework Agreement : (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


Linking EGS Negotiations and Climate Change : 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


Slide19: Thank you for your attention!