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 13: Negative Incentives: Using ‘Sticks’

Tracey Epps and Andrew Green


WHY USE STICKS? As we noted earlier in this book, a core concern in addressing climate change is the incentive for countries to free-ride on the efforts of others. One solution to the free-rider problem is for the parties to enter into a multilateral international agreement relating to the issue at hand. However, as can be seen from the case of the Kyoto Protocol and the more recent post-Kyoto negotiations, there are difficulties with both participation and compliance. With the Kyoto Protocol, some countries refused to participate (at least in the sense of agreeing to binding commitments under the Protocol). Others, such as Canada, have signed on and taken binding commitments but, at the end of the compliance period, will not have met these commitments. These issues will be discussed in Chapter 14. This chapter discusses the use of unilateral ‘sticks’ where such agreement has not been reached or complied with – that is, measures taken by a country not as part of a climate change agreement but on their own to force other countries to act. ‘Sticks’, or negative incentives, could be used either to force countries to take domestic action on climate change (or a particular form of action) or to attempt to force participation in and compliance with a multilateral agreement. These sticks include very high tariffs and bans on trade with particular countries, either generally or in certain products or sectors. They could be based on the characteristics of the products themselves or on how these products...

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