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 6: Taxes

Tracey Epps and Andrew Green


INTRODUCTION As noted in Chapter 2, global warming reflects a market failure, largely due to there being no price on emitting GHGs into the atmosphere in most countries.1 Many economists therefore argue that pricing GHG emissions is one of the most effective and efficient mechanisms for mitigating climate change. The rationale is that pricing will deliver both short-term gains through efficiency and long-term gains from investments in research and switching to cleaner fuels.2 Pricing GHG emissions may be done through a cap-and-trade system (as discussed in Chapter 5) or via taxation. Despite their potentially positive role in climate change mitigation, taxes may also be misused as a protectionist tool. International trade disciplines are thus critical to ensure that taxes are not abused, particularly at the expense of developing countries. This chapter briefly outlines the case for using taxes to address climate change and surveys the extent of their current and proposed use. It then examines the WTO non-discrimination rules governing Members’ use of internal taxes. Understanding the case for taxes is important when considering these rules and the most appropriate institutional framework for handling disputes between countries over their use and implementation. 6.2 TAXES TO ADDRESS CLIMATE CHANGE Like a cap-and-trade system, a tax is a market-based mechanism that aims to affect market behaviour through setting a price on emissions.3 There is an important distinction between energy taxes, and emissions, 1 Kevin L. Doran and Alaine Ginnochio, United States Climate Policy: Using Market-Based Strategies to Achieve Greenhouse Gas Emission Reductions...

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