Chapter 6: The possibility of defense under general exceptions of GATT Article XX
As discussed in the previous chapter, a carbon tax and an emissions allowance requirement imposed on emissions released during the production process and not on products directly raise questions with respect to their eligibility for border adjustment and issues of compliance with the relevant provisions of the WTO Agreement. Carbon restrictions, even if they were considered to be adjustable at the border, may be found in violation of either GATT Article II:1(b) as import duties imposed in excess of bound tariffs, or of GATT Article XI as quantitative restrictions on importation. A BAM designed as a standard or a label related to the carbon footprint of products may be found to be inconsistent with provisions of the TBT Agreement. A border adjustment of carbon restrictions on exportation, in its turn, risks falling foul of WTO rules on subsidies. In all of these cases, the question of whether carbon-related BAMs can be justified under GATT Article XX must be addressed. Recourse to GATT Article XX seems to be inevitable, as it is the only provision in the GATT that provides for WTO-inconsistent measures being defended if they are taken for legitimate public policy reasons, including public health and environmental protection.
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