Chapter 8: Legal issues arising from the implementation of carbon-related BAMs
The peculiarities of implementing carbon-related BAMs can be just as crucial for their consistency with WTO law as their design. A number of questions arise with respect to the feasibility of administering carbon-related border adjustment schemes because of their novelty, technical complexity and lack of emissions data. Accordingly, a serious implementation concern relates to the methodologies used to trace emissions and calculate the level of a border adjustment. This concern was first raised with respect to BTAs of technically complex taxes as early as in 1970. The GATT Working Party on BTAs noted that there were some taxes which, while generally considered eligible for adjustment, presented a problem because of the difficulty in some cases of calculating exactly the amount of compensation. Examples of such difficulties were encountered in cascade taxes. For adjustment, countries operating cascade systems usually resorted to calculating average rates of rebate for categories of products rather than calculating the actual tax levied on a particular product. ... Other examples included composite goods which, on export, contained ingredients for which the Working Party agreed in principle it was administratively sensible and sufficiently accurate to rebate by average rates for a given class of goods. Similarly, an imposition of carbon taxes and emissions allowance requirements presents methodological challenges which could considerably influence the compliance of carbon-related BAMs with WTO rules.
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