Carbon Tariffs and the WTO: An Evaluation of Feasible Policies

Abstract

Both the European Union, which currently has an emissions trading scheme for greenhouse gases, and the USA, which is considering implementing such a program, are exploring the possibility of including foreign producers in that program by requiring importers of foreign goods to pay charges relating to the amount of CO2 emitted in the production of those goods. This article examines the legality of such measures under WTO law. While academic literature has in recent years considered carbon tariffs in the abstract, this article contextualizes that discussion by analyzing European and American proposals to enact carbon tariffs, focusing primarily on the 2008 Lieberman-Warner Bill. This article concludes that carbon tariffs are, subject to a number of constraints, generally permissible under WTO law. However, it also argues that while carbon tariffs may generally be legally permissible, additional domestic political constraints may significantly limit the set of legal carbon tariffs which are practically feasible in any given state. This article posits that any meaningful discourse on carbon tariffs must incorporate both political and legal constraints, and it seeks to contribute to this discourse by identifying the relevant constraints and exploring certain policy options which could satisfy those constraints.

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