Climate Change and International Trade from an Economic and Legal Perspective (CITEL)

The project focuses on the current legislative proposals on inclusion of imports into emissions trading systems of the EU and the US, allowance rebates on exportation, and other options for border carbon offsets, such as a carbon tax on imports and carbon-intensity standards. Although border offsetting measures might be necessary to level the playing field for domestic producers bearing costs of emission reductions under a national cap-and-trade system and to prevent carbon leakage in the absence of international agreement on climate change, possible application of these measures raises a number of legal questions. The key question is related to the PPM-nature of such measures which would be imposed not directly on products but rather on emissions that occured during the production. Carbon-related BAMs might violate basic non-discrimination rules of the GATT and be inconsistent with WTO rules on subsidies. The research will examine the possibilities for these measures to be justified under environmental exceptions of the GATT and might conclude with a number of conceptual and institutional solutions to the problem of inconsistency of carbon-related BAMs with WTO rules.