Bridges Trade BioRes • Volume 7 • Number 19 • 2nd November 2007
US Draft Climate Bills Trigger Trade Concerns
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Two climate change bills currently under review in the US Senate include elements that have raised concern among some trading partners because they would require exporters of energy intensive goods to the US to buy greenhouse gas “emissions allowances” on the US market.
The most recent bill, introduced on 18 October by Joe Lieberman (Independent) and John Warner (Republican), would cap greenhouse gases stemming from 75 percent of the US economy and would introduce emissions trading and other market-based tools.
Defensive action to mitigate potential trade and competitiveness impacts envisioned in the draft bills would target countries without stringent climate regulatons in place, such as China, which is currently not required to make emissions reductions under the Kyoto Protocol. The US itself has also rejected the Kyoto Protocol, and the actual enactment of any legislation to cap greenhouse gas emissions is not expected in the near future.
Meanwhile, on 25 October French President Nicolas Sarkozy called for a European levy on imports from countries outside the Kyoto Protocol, namely the US and Canada. European legislators have called for such border tax adjustments from time to time, but the European Commission has not moved on the issue, preferring a less confrontational approach (see Bridges Trade BioRes, 18 March 2005, http://www.ictsd.org/biores/05-03-18/inbrief.htm#3).
Michael Moore, former Director-General of the WTO, commented on the draft US legislation, saying it “could be the focus of some disputes” at the WTO. He questioned whether de facto price adjustments at the border were legal, especially in cases where some trading partners were non-parties to the environmental agreements underpinning such adjustments. The WTO-compatibility of climate-related border tax adjustments discussed in Europe is also contested.
Countries are set to discuss the future of the global climate change regime at a summit in Bali, Indonesia, from 3-14 December this year. Trade ministers will also convene at the event.
“U.S. Senators Propose Compulsory Greenhouse Gas Cuts,” ENS, 18 October 2007; “INTERVIEW:US Climate Change Bills Risk Trade Rows-Ex WTO Head,” DOW JONES, 24 October 2007; “Climate change: Sarkozy backs carbon tax, EU levy on non-Kyoto imports,” AFP, 25 October 2007.
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