1. Overview of Kyoto-Trade Rules Interactions Aaron Cosbey Associate, Climate Change and Energy, IISD Climate Change, Trade and Competitiveness COP 11/MOP 1 Side Event, Dec. 3, 2005

2. Two bodies of international law, potential for conflict. No conflict has ever arisen, so this is a scoping exercise in prophylactic analysis. The Context

3. Use of tariffs, trade barriers: probably illegal, but also unlikely Use of carbon taxes combined with border tax adjustment: could be a problem. No legal consensus on this. Technically nothing is GATT-illegal if it can be saved by the Exceptions – Art. XX. This is the wildcard. The GATT

4. Subsidies for preferable production, R&D (e.g., biofuels, PV solar): no domestic preferences, no specific enterprises Emissions trading: careful with initial allocation – must reflect market value CDM: only an issue if unilateral CDM, government subsidizes and aims subsidies only at domestic investors. Subsidies Agreement (SCM)

5. Technical Barriers to Trade: eco-labelling, energy standards – voluntary labeling probably OK; Standards either based on international standards, or must justify why not Government Procurement: as long as no discrimination involved, probably OK. (may be saved by Art. XXIII Exception anyway) Dispute settlement: where does the dispute go if there is one? EU GSP conditionalities: uncertain legality. Other WTO Agreements

6. Environmental Gods and Services negotiations: –list some goods as “environmental” –specify CDM use as one defining characteristic. Subsidies Agreement Article 8 Exceptions: can they be revived? Possible Synergies

7. In most cases, all that is required to avoid conflict is careful design (BTA might be the exception) There are important areas of potential synergy – need to be actively pursued Conclusions

8. Thank you Aaron Cosbey acosbey@iisd.ca www.iisd.org/climate www.iisd.org/trade