Can Carbon Tariffs be both Legal and Effective under WTO Rules?
The proposed mechanism by which carbon tariffs would be implemented is the “border tax adjustment.” This WTO-approved tariff method is normally intended to equalize various expenses, or lack thereof, in the exporting country with similar kinds of producer costs in the importing country. So far, the WTO can give no guidance in applying adjustments to CO2 emissions. There are strong arguments that could make border tax adjustments on CO2 emissions a violation of the rules. The resulting liability risk might in itself discourage or delay the use of carbon tariffs. Even so, Veel concludes that arguments in support of carbon tariffs might in the end prevail. He suggests they would probably not succeed through an attempt to balance trade expenses, but rather to protect exhaustible natural resources. Importing countries could argue that “an atmosphere without excessive amounts of CO2 can be characterized as an exhaustible natural resource.” GATT Article XX(g), concerning more conventional und
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