1. 1 What can WTO Law do for Climate Change: Potentials and Limits Thomas Cottier NCCR – Trade Regulation World Trade Institute, Bern

2. 2 Agenda The Role of Law in Climate Change Foundations Non-discrimination and Taxation Tariff Policies Subsidies Technology Transfer Government Procurement Services Linkage Issues Conclusions on Research Agenda

3. 3 What Brings International Law to the Table? Framework: A Principled Approach and Exceptions –Non-discrimination, –Transparency –Response to State Failure (Compensatory Constitutionalism, Multilayered Governance) Focus on Procedure (political, judicial) Dispute Settlement and Enforcement (Sanctions) Progress Case by Case; Experience Detailed Regulation Implementing Policies (Constitution of Markets)

4. 4 Pertinent Foundations Common Heritage of Mankind (prior to 1992 Rio Conference) Permanent Sovereignty of Nation States over Natural Resources affirmed The Emerging of Principle of Common Concern beyond National Borders The Principle of Precaution The Principle of Sustainable Development Progressive Liberalization and Regulation (WTO)

5. 5 Linking Climate Change and Trade Regulation Adaptation – Agriculture –Trade in Water – Migration –Structural Adjustment –Retraining –Social Security –Insurance –Risk Management Mitigation – Taxation and Tariffs – Subsidies – Technology Transfer – Energy Services – Financial Services –Gvt. Procurement Communication – Freedom of Information and of Speech – Education, Knowledge Transfer – Access to Climate Change related Services

6. 6 Impact of Non-Discrimination Most Favoured Nation Treatment (Art. I GATT) –Alike Treatment of All 153 Members of the WTO; exemption of comprehensive preferential trade agreements National Treatment (Art. III GATT) –Treatment no less favourable of imported like and substituting products –Subject to exemptions in particular for the protection of non-renewable resources, including air and climate (US - Gasoline)

7. 7 Border Tax Adjustment GATT II:2 (a) allows for BTA not in excess of an internal tax on a product or a tax on input articles Key issues: Can tax go beyond BTA? Can product be distinguished on the basis of Production and Process Methods) ? GATT in principle allows for an adjustment for a tax on certain chemicals used in the process of producing products the polluting effect of which happened abroad (US – Superfund) Differential Treatment on the basis of PPM can be justified for the protection of global commons (Art. XX(g) GATT, subject to conditions

8. 8 Tariffs Tariffs in WTO main Lawful Instrument of Protection Tariff Reduction in Industrial Goods reduced on average from 40% to 4 %; agriculture: >20%) Consolidation and Bound Tariffs Unilateral Deconsolidation and Compensation Issues: –Should we use tariffs to achieve a level playing in climate mitigation? –Should tariffs be deconsolidated and imposed on the basis of CO2 emission standards of products, and PPMs? –Multilateral negotiations, unilateral or bilateral approach? –How to compensate sectoral increases?

9. 9 Subsidies Do the WTO Agreement on Subsidies and Countervailing Duties and the Agreement on Agriculture allow for climate-friendly subsidies? - - Kyoto 2.1.a (iv): –Subsidies for energy conservation –Subsidies for RE production or consumption –Subsidies for R&D grants for climate technologies –Subsidies for carbon capture & storage Kyoto 2.1 subsidies are not excluded by WTO (actionable subsidies – yellow light)

10. 10 Technology Transfer Art 66.2 Agreement on Intellectual Property (TRIPs) – LDCs technology transfer obligation Multilateral Environmental Agreements have weak technology transfer obligations Clean Development Mechanism (CDM): incentive for technology transfer Incentives schemes for knowledge transfer required (tax reductions v. export subsidy)

11. 11 Government Procurement Agreement on Government Procurement (GPA) allows to condition Purchases on Ecology and arguably PPMs (Product Specification) National Treatment and Equal Opportunity Transparency Requirements

12. 12 Energy Services Enhancing Energy Efficiency by competing Energy Suppliers Enhancing Market Access for foreign Service Suppliers Restriction of Monopolies Regulation of Public Services Reform of GATS Commitments for Energy Services required Review of Russias Terms of Accession

13. 13 Financial Services Enhanced Market Access (National Treatment) for global System of Emission Certificates Trading Required? Implications for Financial Liberalization and Regulation in GATS? Implications for Domestic Regulation under GATS?

14. 14 Environmental Goods & Services Negotiations Doha Declaration: With a view to enhancing the mutual supportiveness of trade and environment, we agree to negotiations, without prejudging their outcome: ….. (iii) The reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.

15. 15 The Environmental Area Initiative (EIA) Approach Multilaterally agreed environmental area Services, goods incl. EPPs, TBTs, IPRs, domestic regulation and other areas Goals and targets may be adopted from Millennium Development Goals (MDGs), MEAs, and other international agreements Result in binding WTO commitments (GATT and GATS)

16. 16 Institutional Challenges Decision-making processes: –Dual approach of ongoing negotiations and market access rounds –consensus no longer suitable: weighted voting? (highly controversial) Interface of WTO and MEAs including Kyoto II unsettled: Integration into WTO via reference?

17. 17 Conclusions Precaution Justifies Taking Action against CO 2 Emissions Interdisciplinary Research Primarily based upon Empirical Analysis Prospective Models need to take Legal Framework into Account Development of Detailed Rules for Implementation

18. 18 Thank you for your attention!