Chapter 5: PPM-based border adjustment under WTO law
The legality of adjusting carbon taxes and carbon regulations at the border depends, to a large extent, on the status of measures linked to non-product-related processes and production methods (npr-PPM measures) under WTO law. WTO provisions contain many legal uncertainties regarding npr-PPM measures, and the debate on the legality of such measures remains unsettled. The purpose of this chapter is to highlight the main legal problems that could arise for carbon-related border adjustment in connection with its peculiarities so far as PPMs are concerned. This chapter does not deal with the non-PPM-related legal issues of carbon-related BAMs. These issues will be discussed in Chapter 7 after examining the possibility of justifying carbon-related BAMs under the general exceptions of the GATT, thereby complementing and completing the legal analysis of carbon-related BAMs started in this chapter. The chapter begins by providing a definition of PPM measures and their most widely used classification. It proceeds to describe the history and the evolution of the PPM issue, tracing it from the early times of the GATT to the recent PPM-related disputes at the WTO. Taking into account the PPM nature of carbon taxes and regulations, the chapter then examines the eligibility of carbon restrictions for border adjustment. Afterwards, it discusses the issue of the likeness of carbon-intensive and low carbon products for the purposes of later examining the compliance of carbon-related BAMs with the national treatment obligation under GATT Article III, the MFN obligation under GATT Article I, and the non-discrimination rules of the TBT Agreement.
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