U.S. Climate Change Legislation and the Use of GATT Article XX to Justify a "Competitiveness Provision" in the Wake of Brazil-Tyres
Ponnambalam, Arjun, Georgetown Journal of International Law
The release of the Fourth Assessment Report by the Intergovernmental Panel on Climate Change ("IPCC") in 2007 put to rest much of the controversy that once surrounded global warming. According to the IPCC's report, "[w]arming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global average sea level." (1) The causal link between human activity, global warming, and adverse environmental consequences has likewise been strengthened, (2) and as a result, the need to modify human activity in response to this threat has emerged as a concern for both developed and developing countries.
As the largest historical emitter of greenhouse gasses in the world, both in terms of total and per capita emissions, (3) the United States must play a central role in combating global warming. (4) It is no longer a question of whether, but rather how, the U.S. should engage in international efforts to curb greenhouse gas ("GHG") emissions.
There are a number of ways in which the U.S. could limit its GHG emissions, including taxation of emissions or energy use, subsidies for low-carbon manufacturing technologies, labeling and certification requirements, and emissions trading schemes. (5) Currently, one of the most politically attractive approaches, which has garnered bipartisan support, is a cap-and-trade mechanism whereby the U.S. would set a limit on GHG emissions on an economy-wide or sectoral basis, and then allocate (through a grant, auction, or a combination of the two) allowances equivalent to the cumulative emissions target. Companies would then be required to submit to the government the number of allowances corresponding to the emissions they produce during each compliance period. (6) Since the cost of reducing emissions varies between companies, the emissions allowances can be traded in a specially regulated market, thereby enabling companies that face higher compliance costs to purchase more allowances instead of cutting emissions. (7) By introducing a market-based trading system, a cap-and-trade regime not only creates a financial incentive for companies to reduce emissions, but also promotes reductions in the areas in which they can be most efficiently achieved. (8)
A recent survey identified thirteen climate change bills working their way through Congress, twelve of which feature a cap-and-trade mechanism. (9) One of these bills, the Lieberman-Warner Climate Security Act, garnered significant publicity as the first truly viable piece of climate change legislation. In fact, it was the first climate change bill establishing a cap-and-trade system to be voted out of a Congressional committee and reported to the full Senate for consideration. (10) The Lieberman-Warner bill proposed a progressively decreasing cap on U.S. emissions, (11) and mandated a 4% cut in covered source emissions (12) by 2012, a 19% cut by 2020, and a 71% cut by 2050 (using a 2005 baseline). (13) Opponents of the bill argued that capping U.S. emissions would increase energy costs at a time when American consumers were already paying record prices for gasoline, and succeeded in blocking the bill from proceeding to an open vote. (14) Although the political climate was not conducive to the passage of the Lieberman-Warner bill, there remains strong bipartisan support for similar cap-and-trade legislation. (15) In fact, both Presidential candidates have publicly endorsed a cap-and-trade mechanism for addressing global warming, (16) and the Lieberman-Warner bill could very well serve as a template for future climate change legislation.
The potential implementation of a cap-and-trade system raises two concerns for U.S. domestic economic interests. First, domestic manufacturers fear being placed at a disadvantage vis-a-vis foreign competitors not subject to similar emissions regulations. …