Climate Taxes and the WTO: Is the Multilateral Trade Regime a Further Obstacle for Efficient Domestic Climate Policies?
ECOLOMIC Policy and Law Journal of Trade and Environment Studies, Vol. 3, No. 8, pp. 1-24, 2006
24 Pages Posted: 13 Aug 2007
Industrialised countries are often required to make unpopular policy choices in order to efficiently tackle climate change. On the one hand, domestic industries might consider national climate measures as an excessive burden that may damage their competitiveness. On the other hand, the public may not be willing to pay a higher price for climate friendly products. Furthermore, an obstacle may arise from other international legal regimes whose goals may be undermined by climate domestic measures. In the paper I will examine this last possibility. In particular, I will assess whether the international trade regime may constitute an obstacle for future domestic climate measures. An affirmative or negative conclusion will be drawn after having answered three crucial questions throughout the paper.
First, have domestic climate measures already clashed with trade regimes? In 2001 the problematic relationship between a taxation scheme adopted by Finland to improve energy efficiency and EC rules on the free movement goods highlighted this possibility.
Second, are taxation schemes still being used in order to tackle climate change? Current climate policies show that not only taxes are being established, but that in the future measures based on border tax adjustments are also taken into consideration.
Third, are climate taxes WTO compatible? The analysis of those WTO rules with whom the climate domestic measures may enter into conflict, and the study of the environmental exceptions that could be applied to the climate taxation schemes, will guide our analysis on this point.
In conclusion, trade regimes should not constitute an obstacle for domestic climate measures. However, as the EU example demonstrates, this is not always true. Therefore, proposals able to bridge the goals of the two regimes must be made in order to prevent the WTO from being considered another obstacle for efficient domestic climate policies.
Keywords: climate, taxes, WTO
JEL Classification: K33, K32
Suggested Citation: Suggested Citation