Chapter 7: Testing WTO compliance of various forms of carbon-related BAMs
Based on the WTO legal framework for border adjustment, which was discussed above, with its uncertainty about PPM measures and the conditions required for a measure to be justified under its environmental exceptions, this chapter tests the compliance of various possible designs of carbon-related BAMs with WTO law. As the WTO legal issues that stem from the PPM character of carbon-related BAMs were discussed in Chapter 5, this chapter only briefly summarizes these issues and then goes on to supplement the legal analysis with an examination of non-PPM-related issues pertinent to a specific type of carbon-related BAM. The examination of whether a carbon-related BAM is consistent with WTO law follows the traditional sequence. First, the relevance of a WTO-covered agreement to the measure under examination is determined. Second, whether a measure falls within the scope of an actual obligation under a covered agreement is analyzed. Third, the analysis of a violation or non-violation is only made once the coverage of a measure by a provision of an agreement has been affirmed (a measure must fall within the scope of an obligation in order to violate it). If a measure is found to be outside the scope of a provision, the test for WTO compliance will end at the second step. If a measure is found to fall within the scope of a provision and to violate the provision, a fourth step examines whether the violation could be justified by the general exceptions of Article XX.
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