The US Proposed Carbon Tariffs, WTO Scrutiny and China’s Responses

Abstract

There is a growing consensus that climate change has the potential to seriously damage our natural environment and affect the global economy, thus representing the world’s most pressing long-term threat to future prosperity and security. With greenhouse gas emissions embodied in virtually all products produced and traded in every conceivable economic sector, effectively addressing climate change will require a fundamental transformation of our economy and the ways that energy is produced and used. This will certainly have a bearing on world trade as it will affect the cost of production of traded products and therefore their competitive positions in the world market. This climate-trade nexus has become the focus of an academic debate (e.g., Bhagwati and Mavroidis 2007; Charnovitz 2003; Ismer and Neuhoff 2007; Swedish National Board of Trade 2004; The World Bank 2007; Zhang 1998, 2004, 2007a; Zhang and Assunção 2004), and gains increasing attention as governments are taking great efforts to implement the Kyoto Protocol and forge a post-2012 climate change regime to succeed it.

A similar version of this chapter has been previously published in International Economics and Economic Policy, Special Issue on “International Economics of Resources and Resource Policy”, Volume 7, Numbers 2–3/August 2010.

This chapter is built on the keynote address on Encouraging Developing Country Involvement in a Post-2012 Climate Change Regime: Carrots, Sticks or Both? at the Conference on Designing International Climate Change Mitigation Policies through RD&D Strategic Cooperation, Catholic University Leuven, Belgium, 12 October 2009; the invited presentation on Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO? both at the International Workshop on Post-2012 Climate and Trade Policies, the United Nations Environment Programme, Geneva, 8–9 September 2008 and at Shanghai Forum 2009: Crisis, Cooperation and Development, Shanghai, 11–12 May 2009; the invited presentation on Climate Change Meets Trade in Promoting Green Growth: Potential Conflicts and Synergies at the East-West Center/Korea Development Institute Conference on Climate Change and Green Growth: Korea’s National Growth Strategy, Honolulu, Hawaii, 23–24 July 2009; the invited presentation on NAMAs, Unilateral Actions, Registry, Carbon Credits, MRV and Long-term Low-carbon Strategy at International Workshop on Envisaging a New Climate Change Agreement in Copenhagen, Seoul, 13 November 2009; and the invited panel discussion on Green Growth, Climate Change and WTO at the Korea International Trade Association/Peterson Institute for International Economics International Conference on the New Global Trading System in the Post-Crisis Era, Seoul, 7 December 2009. It has benefited from useful discussions with the participants in these meetings. That said, the views expressed here are those of the author. The author bears sole responsibility for any errors and omissions that may remain.