Tuesday, 8 December 2009

The U.S. Proposed Carbon Tariffs, WTO Scrutiny and China's Responses

This paper can be downloaded at the URL:
http://mpra.ub.uni-muenchen.de/19063/ or

ZhongXiang Zhang

East-West Center

December 2, 2009

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 their specific design features and the
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.

Meanwhile, 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 a common position on other key issues in
international climate change negotiations.

This paper can be downloaded at


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http://mpra.ub.uni-muenchen.de/18858/ or

In What Format and Under What Timeframe Would China Take on Climate
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