Edited by Panagiotis Delimatsis
Chapter 4: Carbon taxes, PPMs and the GATT
Climate change is an example of a worldwide tragedy of the commons. The option of introducing carbon taxes has increasingly been discussed as a possible remedy, namely as an economic solution that may be both efficient and effective. However, carbon taxes tend to encounter strong opposition by domestic industries for competitiveness concerns. Therefore, and for reasons of effectiveness and equity, carbon taxes arguably need to be accompanied by border measures that apply to imported products. One type of border measure that is usually discussed in connection with carbon taxes is the instrument of border tax adjustments (BTAs). While BTAs are a classic instrument of trade policy, so far it has rarely been used in relation to environmental taxes. This contribution, therefore, concentrates on the question of the WTO consistency of carbon taxes and related-BTA schemes. Due to the lack of international cooperation, the legality of such unilateral climate measures will arguably remain topical for many years.
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