Main Obstacles to Climate Action Are in Trade Agreements

By Woodworth, Garth | CCPA Monitor, May 2010 | Go to article overview

Main Obstacles to Climate Action Are in Trade Agreements


Woodworth, Garth, CCPA Monitor


TRADE VS. FOSSIL-FUEL REDUCTIONS:

Four years ago, Prime Minister Stephen Harper abandoned Canada's Kyoto obligations in favour of his "made in Canada" plan. This option was also later dropped when he decided to align our climate action with that of the United States.

In the U.S., three bills have made it to Congress or the Senate, but none has yet become law. The Lieberman-Warner bill, introduced in 2003, was defeated in the Senate in 2008. The Waxman-Markey bill was approved by the House of Representatives in 2009, but has yet to be considered in the Senate. And the Boxer-Kerry bill is still under consideration in the Senate.

If any of these bills is eventually passed into law, it will use 2005 as a base year for emission reductions instead of Kyoto's 1990 base year. In the best-case scenario, U.S. emissions might be brought back to 1990 levels by the year 2020. This would be eight years late and 7% short of what would have been required under Kyoto.

By comparison, the European Union countries are already 7.7% below 1990 levels, and are committed to a 20% reduction by 2020. If lagging countries would agree to join them, the EU nations are willing to commit to a 30% cut in emissions by 2020.

Why can the EU get such results when the U.S. and Canada can't? What blocks international action when atmospheric C02 levels are already past the "safe" level on the way to runaway global warming?

The main obstacles may be found in world trade agreements.

The World Trade Organization (WTO)

The WTO's mission is to expand world trade through the reduction of trade barriers and promotion of a level playing field. Its 150 member nations are legally bound to adhere to the Most Favoured Nation (MFN) principle. The WTO website tells us that, "Whatever applies to one member applies to all." This is "so important that it is the first article of the General Agreement on Trade and Tariffs (GATT)." The all- important foundation of the WTO is non-discrimination. A breach of this principle can result in expensive compensation penalties to the offending nation.

In spite of the emphasis on this point, some exceptions do exist, and at least two of them affect climate action. First, groups of nations are allowed to form free trade blocs, such as North America's NAFTA and Europe's European Union (EU). The blocs aren't bound to extend internal preferential treatment to outsiders. Another exception allows, or even requires, special treatment of developing countries and leastdeveloped developing countries (LCCDs). Both these exceptions affect cap-and-trade programs, the favoured method of controlling greenhouse gas (GHG) emissions.

Paul-Erik Veel, law clerk for Supreme Court Justice Louise Charron, has looked at cap-and-trade systems vis-avis the WTO. His 2009 article, Carbon Tariffs and the WTO: An Evaluation of Feasible Policies, is a must-read for anyone who wishes to understand the market approach to C02 emissions.

Veel sees American domestic political constraints on capand-trade programs as fundamentally at odds with WTO legal constraints. Acknowledging a debt to his analysis, this paper proposes that climate action must necessarily be undertaken outside WTO trade agreements, and that a rationing scheme may be the most effective form it can take.

Climate Action

The most successful climate action is found in the EU where, as a free trade bloc, WTO rules can be modified by agreement among its members, facilitating a cap-and trade system. GHG limits on industry can be set within the bloc, but any traderelated attempt to extend them to countries outside the EU can violate WTO rules. Here is a first indication that world trade constraints interfere with wider climate success.

The EU began an emissions trading scheme (ETS) in 2003. By 2009, 40% of EU carbon-intensive industry - over 10,000 facilities - needed emissions permits to operate. This requirement competitively disadvantages EU producers compared with outside producers. …

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