Changing Climate for Carbon Taxes: Who’s Afraid of the WTO?

7/30/2019 Changing Climate for Carbon Taxes: Whos Afraid of the WTO?

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CLIMATE & ENERGY PAPER SERIES 2013

CHANGING CLIMATE FOR CARBON TAXES

Whos Afraid of the WTO?

JENNIFER HILLMAN


2/18

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Changing Climate for Carbon Taxes

Whos Afraid of the WTO?

Climate & Energy Policy Paper Series

July 2013

J H

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4/18

Changing Climate for Carbon Taxes 1

Introduction

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The key is to struct

any accompanying

border measure as

a straightforward

extension of the

domestic climate p

to imports.


5/18


The Simple Path

1

Complications only

should policymaker

choose to go beyon

a tax applied to any

all domestic produc

or users of carbon

tax or place restricton foreign goods or

companies.

Carbon Tax on U.S. Production

and Use of Fossil Fuels

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Application of the Carbon Tax to Imports?

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The German Marshall Fund of the United States4

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7/18


Adding Complications:

Equivalent Tax on Imports2

How other member

of the WTO would

respond to such a t

on their imports wo

likely depend quite

significantly on how

the tax was designeand whether other

countries perceived

their rights under th

WTO Agreements w

violated.

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Internal Charge? GATT Article II versus Article III

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Affecting Imports of Automobile Parts, WT/DS9/AB/R, J , 9. S, , Pw, J. (), C LkM B T Aj WTO Lw, - Pv, D. V C, G. (.), Research Hand-book on Environment, Health, and the WTO, Ew E, ,www../=6879 . P Pw more permissive GATT A III, , , , ( ) .4.
http://www.ssrn.com/abtract=2026879http://www.ssrn.com/abtract=2026879


8/18


The simplest and most

likely WTO-consistent

path for policymakers

would be to impose a

carbon tax on products

both domestic and

imported at thetime of their sale,

istribution, or transfer.

Indirect versus Direct Tax

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9/18


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How Much Is the Tax?

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The farther

policymakers move

from a tax on produ

or the consumption

products, the murk

becomes as to whe

a domestically apptax can be legally

assessed on impor

under the GATT.


10/18


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Measures Affecting the Importation and Sale of Cigarettes, WT/DS/AB/R, M 9, 5; A . TBT A- w v . United States Measures

Affecting the Production and Sale of Clove Cigarettes, WT/DS46AB/R, 74; United States Measures Concerning the Impor-tation, Marketing, and Sale of Tuna and Tuna Products, WT/DS8/AB/R, 5.


11/18


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Measures Affecting the Importation and Internal Sale of Cigarettes(DR Cigarettes), WT/DS/AB/R, M 9, 5, 96.

Should the WTO

nonetheless find

no room in Article I

or Article III for the

application of a BTA

or that the GATT ru

do not permit bordeadjustments for en

or fossil fuels... the

the United States w

be well positioned t

defend the BTA und

the general excepti

provision of Article

the GATT.


12/18


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Past cases would

suggest that

demonstrating that a

x on carbon emissions

assessed both

domestically and at the

order on imports wouldfit within either or both

of the requirements of

XX(b) or XX(g).


13/18


The problem for the

United States will b

that differentiation

the BTA based on t

country-of-origin of

imports would mos

likely result in a vioof the GATTs mos

favored nation (MF

principle.

A Further Complication:

Giving Credit Where Credit is Due?3Tax All Like Products Alike

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A Second Trip Down the Road to Article XX

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14/18


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BTA

jv k

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15/18


Without such an

exemption, if few

countries impose th

own carbon taxes

or carbon reduction

schemes, then U.S.

exporters would beat a competitive

disadvantage.

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F 6 A II SCM A v:I - , , , w .

A Final Complication: Rebates to

U.S. Producers on Their Exports4


16/18


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A significant allocation

to developing country

climate efforts would

help demonstrate

that the United States

eeks to use the BTA to

ombat climate changerather than protect its

own industries.


17/18


Conclusion

6

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18/18

O F F I C E S

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Changing Climate for Carbon Taxes: Who’s Afraid of the WTO?