Carbon Pricing, The WTO and Canadian Federalism

Andrew GreenFaculty of Law and

School of Public Policy and GovernanceUniversity of Toronto

October 18, 2008

Carbon Pricing, The WTO and Canadian Federalism

• What instruments?

• Who is obligated?

• Who decides?

WTO and Climate Policies

• Significant threat of protectionism• Reducing GHG as additive public good• Risk of free-riding

• Trade measures can be used as:• carrot• stick• reducing disincentives to action

What Makes Climate Change So Difficult for the WTO?

• Hard for WTO to sort out protectionist measures

• Different costs and benefits across states• Different preferences across states• Uncertainties – especially about what will work

Border Tax Adjustments (BTAs)

BTAs on Imports:• Tax or charge on imports• WTO: Equivalent to tax or charge in domestic

market

BTAs on Exports• Rebate of or exemption from costs • Illegal subsidy?• WTO: Same level as for domestic market

What Instruments?

• Taxes v Trading• BTAs for Taxes – indirect• BTAs for Trading – “internal tax or other charge”?

What Instruments?

• Product v Process• BTAs on Imports

– Article XX List of exceptions:» Article XX(b): “necessary to protect human, animal or

plant life or health”» Article XX(g): “relating to the conservation of

exhaustible natural resources”» Chapeau: no unjustifiable or arbitrary discrimination

or disguised restriction on trade

• BTAs on Exports– “prior stage indirect cumulative taxes” on inputs

consumed

Who is obligated?

• Federal, not provincial governments– Federal state clause: feds to take “reasonable

measures” to ensure compliance – if not, sanctions

• Not all governments in practice– If breach, complaining party gets to impose

countermeasures (raise tariffs)– Prospective– US?

Who Decides?

• Open questions about WTO rules

• Balancing efficiency and values

• WTO – panels, Appellate body

• Deference to domestic governments?• Recent moves towards greater deference