Climate Negotiations, EITE Industries, and the WTO: Facing the Conflicts

Though developed countries have contributed the lion's share of greenhouse gases to date, developing countries are rapidly catching up – and seem unlikely to adopt meaningful GHG controls in the near term. This prospect concerns major developed countries, since their own GHG controls could cause carbon-intensive production to migrate to unregulated countries, a phenomenon called “carbon leakage.” This article surveys progress in international negotiations to date. It argues that, given the slow pace of efforts to create a global GHG control framework, carbon tariffs and other border measures are likely to be invoked as an alternative means of preventing carbon leakage. The article illustrates the legal and economic pitfalls of border adjustments and urges major emitting countries to suspend the imposition of border measures for a limited time while negotiating a “Code of Good Practice” to guide their trade-related climate measures going forward. The Code that we describe would constrain the scope of border measures and sharply limit their negative consequences.