Climate Border Adjustments and WTO Law

Ulrike Will, Ph.D. (2018) European University Viadrina Frankfurt (Oder), Germany, is a Researcher in the project “Incentives, Fairness and Compliance in International Environmental Agreements” (InFairCom) at the Leipzig University of Applied Sciences in Germany.

• AcknowledgmentsList of AbbreviationsList of Figures and Tables1 Introduction2 The EU Emissions Trading System Leading to Carbon Leakage Effects2.1 United Framework Convention on Climate Change, Kyoto Protocol and Paris Agreement2.2 EU Emissions Trading System (ETS)2.3 Carbon Leakage Effects and Competitive Disadvantages2.4 Current Approaches to Carbon Leakage in the EU2.4.1 Export Rebates and Carbon Leakage List2.4.2 The Extension of the EU ETS to International Flights2.4.3 Proposal for an Import BA for Cement and Clinker2.5 Result: The Need for an Import Carbon Leakage Policy3 Trade Measures to Resolve the Carbon Leakage Problem3.1 Measures between Trade Liberalisation and Trade Restriction3.2 Committee on Trade and Environment3.3 Doha Round and Environmental Goods Agreement3.4 Unilateral Instruments3.4.1 Import Ban, Quota and Standard3.4.2 Carbon Tariff3.4.3 Border Adjustment (BA) and the Integration into the EU ETS3.4.4 Linking the EU ETS with other ETSs3.5 Climate-Related Trade Instruments within Preferential Trade Agreements3.5.1 Recognition and Harmonisation of Climate-Related Standards3.5.2 Conditional Tariff Policy3.5.3 A Common Border Adjustment3.5.4 Linking the EU ETS with Other ETSs3.6 Result: Unilateral BA for the EU ETS4 Structuring the BA in the WTO Context4.1 Focus on Imports4.2 Aims4.3 Interests4.4 Effects4.5 Provoking or Avoiding WTO Disputes?4.6 The Multiple Legal Nature of ETS, BAs and Certificates4.7 The Impact of International Climate Agreements on WTO law4.8 Result: BA on Imports Complementing the EU ETS5 ETS and BA Restricting Trade in Goods5.1 Measures at Issue: ETS and BA as Complementary Measures5.2 Constellations of Discrimination5.3 ETS and BA as Domestic Fiscal Measure5.3.1 BA as a Charge Equivalent to an Indirect Tax5.3.2 ETS and BA as Fiscal Measure5.3.3 BA Not Charging Foreign Products in Excess of Domestic Like Products5.3.4 Taxing Foreign Products Similarly Compared to Competitive EU Products5.4 BA as Domestic Non-Fiscal Measure5.5 BA as a Restriction on Market Access5.6 Different BAs for Different Countries and the Most-Favoured Nation Treatment5.6.1 Advantage5.6.2 Like Products5.6.3 Advantage Accorded Immediately and Unconditionally5.6.4 Exceptions for Developing Countries (Enabling Clause)5.6.5 Exceptions for Preferential Trade Agreements5.7 How to Avoid Restrictions of Article III GATT5.8 ETS and BA as Climate Measures under the General Exceptions5.8.1 Climate-Related Concerns the ETS and BA Seek to Protect5.8.2 Regulatory Autonomy for Climate Policy5.8.3 Necessity Test5.8.4 ‘Relating to’ Requirements5.8.5 Exclusion of Disguised Discrimination5.8.6 Limiting Extra-Jurisdictional Effects5.9 How to Avoid Restrictions of Article XX GATT5.10 Notification and Transparency5.11 Result: BA without Emissions-Based Product Distinctions6 ETS and BA Implying Technical Regulations or Standards6.1 Measures at Issue: ETS and BA as Complementary Measures6.1.1 Technical Standards6.1.2 Technical Regulations6.2 Constellations of Discrimination and Restriction6.3 Climate-Related Concerns the ETS and BA Seek to Protect6.4 Necessity Test6.5 Non-Discrimination of Foreign Products6.5.1 Like Products6.5.2 Treatment No Less Favourable and Exclusion of Disguised Discrimination6.6 Limiting Extra-Jurisdictional Effects6.7 Notification and Transparency6.8 Technical Assistance6.9 Special and Differential Treatment of Developing Countries6.10 Result: Product-Based BA Complying with the TBT Agreement7 ETS and BA Affecting Trade in Services7.1 Measures at Issue: ETS Alone or ETS and BA as Complementary Measures7.2 Constellations of Discrimination and Affected Services7.3 EU Schedule of Commitments in the Relevant Sectors7.4 Restriction of Environmental Services7.5 Restriction of Financial Services7.5.1 The EU Schedule and Financial Services7.5.2 Exclusion of Foreign Certificates as Market Access Restriction7.5.3 National Treatment of Foreign Certificates7.5.4 Most-Favoured Nation Treatment of Non-Kyoto Certificates7.6 Restriction of Aviation Services7.6.1 Chicago Convention Relevant for the EU?7.6.2 Jurisdiction7.6.3 The GATS Annex on Air Transport Services7.6.4 Inclusion of International Flights into the EU ETS Providing Full Market Access?7.6.5 Treating Foreign as Favourably as EU Flights?7.6.6 Comparison between Non-Kyoto States and Kyoto States7.7 ETS and BA as Climate Measures under the General Exceptions7.7.1 Climate-Related Concerns the ETS and BA Seek to Protect7.7.2 Necessity Test7.7.3 Exclusion of Disguised Discrimination7.7.4 Limiting Extra-Jurisdictional Effects7.8 Participation of Developing Countries7.9 Transparency7.10 Result: Recognition of Foreign Certificates that Contribute to Climate Protection8 Reform Proposal for an Import BA for the EU ETS8.1 Emissions-Based Approach: Integration into the EU ETS8.1.1 Measurement, Calculation8.1.2 Necessary Reforms of the EU ETS8.2 Price-Based Approach: BA Equivalent to the Restriction of the ETS Per Product or Service8.2.1 Measurement, Calculation8.2.2 Necessary Reforms of the EU ETS8.3 Simplifications and Exemptions8.3.1 Limitation of Sectors8.3.2 Threshold8.3.3 Foreign Climate Policies8.3.4 State of Development8.4 Use of Revenues from the BA8.5 Moment of Adjustment8.6 Result: Price-Based Import BA for the EU ETS9 OutlookBibliographyIndex