BCAs: WTO Legal Issues; Principles of Good Practice IISD mini-symposium on trade, investment and climate change December 14, Copenhagen (COP-15) Aaron Cosbey

Is BCA legal under WTO rules? This is a key question – if it were, then little prospect for agreement in current climate talks Impossible to say ex ante Only the WTO dispute settlement mechanism can deliver a final judgment Existing jurisprudence is helpful, but is necessarily case-specific Details matter: how constructed, how implemented; drafting history.

Is BCA legal under WTO rules? Probably they would breach GATT rules on non- discrimination. Why? GATT probably requires that GHG- intensive goods receive same treatment as climate- friendly goods. But the story does not end there – the key question is whether they would qualify for an exception to the rules under GATT Article XX

GATT Article XX Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures... relating to the conservation of exhaustible natural resources.

UNFCCC Article 3.5 Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.

Guidance from WTO cases: what would help make BCA acceptable? Do not require an identical regime: the results are what’s important Take into account the differences between individual producers – at least allow baselines to be challenged First go through good faith efforts to resolve the conflict by multilateral agreement

Selected principles of good practice Only as a fall-back measure – multilateral agreement is best Transparent calculations, opportunity for input, review and appeal mechanisms Calculations should use recognized international reporting protocols No applicability to countries in good standing in multilateral climate change agreement

Selected principles of good practice No requirement for identical regime BCA must account for any free allowances that have been issued Time-limited transitional measure CBDR? Country-wide or sectoral?

Concluding thoughts A WTO challenge would be a no-win scenario The challenge: to tame the beast

Aaron Cosbey Further reading: