Reconciling Trade and Climate
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Reconciling Trade and Climate

How the WTO Can Help Address Climate Change

Tracey Epps and Andrew Green

This timely book addresses the interaction between policies addressing climate change and the rules of the WTO. The authors expertly examine the law and economics behind the application of trade rules in the area of climate, including the implications of WTO rules for domestic climate measures, the unilateral use of trade measures to attempt to force other countries to take climate action, and the role of trade measures in multilateral climate agreements. The book argues that while there is a possibility of conflict between international trade rules and progress on climate change, it need not be the case. Thus the major focus is on the ways in which trade measures can aid in addressing climate change.
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Chapter 5: Regulations and Domestic Emissions Trading

Tracey Epps and Andrew Green


WHEN SHOULD REGULATIONS OR DOMESTIC EMISSIONS TRADING BE USED? Countries attempting to address climate change must find ways to deal with the negative externality that is at its core. As discussed in Chapter 2, individuals and industries obtain the benefits of activities that emit GHGs but do not bear all, or potentially even part, of the cost. Domestic policy must either explicitly impose this cost on individuals and industries or find another means of making them take actions that take these costs into account. There are a range of policy instruments that can potentially fulfil this function, including various types of taxes, subsidies to encourage particular choices and regulations that require individuals or industries to take certain actions. Countries vary in a number of ways, including in their values, priorities, susceptibility to the negative impacts of climate change, and policy preferences, and they need scope to use different policy instruments. Policy flexibility allows adaptation of the type of instrument to the country context. Governments may use regulatory standards in an attempt to specify the type or level of behaviour that takes into account negative externalities. There are a range of different forms of regulatory measures. This chapter will focus on (i) standards, such as emissions levels, for particular goods or activities; (ii) the required disclosure of information, such as through product labelling; and (iii) domestic emissions trading programs. It then turns to how these measures may impact trade. 5.1.1 Types of Regulatory Measures Setting standards Governments may attempt to control...

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