Chapter 4: The classification of GHG tradable instruments as goods
Traditionally within the World Trade Organization (WTO) rules the distinction between a product and a service was clear. That which could be ‘dropped on your foot’ would be classified as a product, and anything that could not be would be a service or in some instances, intellectual property. This distinction has become blurred over time. This has been as a result of technology and the increasing trade in intangible items that could otherwise be classified as products if not for the lack of physical embodiment. In this regard, emissions units and credits represent what could be classified as a new form of product, if the intangible nature is overlooked. The classification of either a good or a service remains an important distinction in relation to WTO rules. This is because the obligations that result from the General Agreement on Tariffs and Trade 1994 (GATT), the agreement for the regulation of products, differ from those of the General Agreement on Trade in Services (GATS), the agreement for services. In particular the GATT 1994 commitments are ‘absolute’ where those of the GATS only apply in relation to sectors as agreed by the Members themselves. It follows that the analysis in this chapter in relation to the classification of emissions units is particularly relevant, especially with the recognition that the WTO agreements will be interpreted in an evolutionary manner. The purpose of this chapter is twofold.
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