Climate Finance: Regulatory and Funding Strategies for Climate Change and Global Development

Chapter 28 The WTO and Climate Finance: Overview of the Key Issues

Climate Finance 247 Chapter 28 The WTO and Climate Finance Overview of the Key Issues Gabrielle Marceau Counsellor, Office of the Director-General, WTO; Professor, University of Geneva Law School Key Points • While the primary goal of the WTO is to prevent unjustified restrictions on trade, the WTO has shown sufficient institutional and normative flexibility to allow member states to address environmental concerns effectively; this should remain true with actions relating to climate change mitigation and adaptation. • The WTO will play a central role in resolving tensions between WTO Members’ domestic policies to limit emissions and their obligations under WTO rules. • As the mechanisms currently open to the WTO to confront climate change are limited, the primary effort to mobilize mitigation must come from international agreements. Climate change, being such a broad issue, intersects with a number of areas of World Trade Organization (WTO) work, although the WTO’s primary focus is to fight distorting trade restrictions. It is often suggested that WTO rules will be in conflict with domestic actions taken under the United Nations Framework Convention on Climate Change (UNFCCC) or other similar multilateral environmental agreements (MEAs), but this need not be the case. The WTO, like the UNFCCC, strives to ensure sustainable development. This brief essay first outlines climate change issues within WTO law, including the Doha Development Agenda (DDA), and 248 Gabrielle Marceau then addresses some of the areas of potential tension between specific climate mitigation actions and obligations under the WTO. The WTO’s core activities are to negotiate reductions of tariffs and subsidies ; to prevent domestic regulatory and other measures that unjustifiably restrict trade; to monitor domestic actions that may affect trade; and to settle disputes among its members. Basic rules include, among others, (1) the prohibition of unjustifiable discrimination between imported and domestic like products and (2) the prohibition of unjustifiable border import and export quotas. Though created following World War II to stimulate the global economy , the WTO has demonstrated an institutional and normative capacity to adapt to the changing needs of its members. Although WTO has not yet discussed or acted on climate change per se, it is inevitable that it will do so in the future. And while WTO jurisprudence has not yet responded to the needs of climate change, it has been responsive to other new environmental needs of members. Therefore, when the WTO deals with climate change, it will benefit from the clarifications of WTO law on the scope of the environmental exceptions in General Agreement on Tariffs and Trade (GATT) Article XX; WTO Appellate Body (AB) decisions have been used to clarify relevant terms, conditions, and issues; and Members, responding to societal changes, have adopted waivers and even amendments to basic WTO provisions. Finally, some Members are talking about a temporary dispute peace-clause for climate-related issues. This could allow Members to rapidly adapt their domestic regulatory systems in a WTO-consistent manner to the needs of climate change mitigation. In this paper, the issue of climate change is addressed from the perspective of the existing provisions of the GATT and the environmental exception in GATT Article XX in particular, as well as how trade negotiation can also facilitate climate change mitigation and adaptation measures. GATT Article XX Article XX enumerates a list of general exceptions that allow Members to give priority to policies other than trade, such as the protection of the environment. Generally, in WTO law a government is entitled to set the level of environmental protection it considers appropriate. Article XX authorizes such environmental measures that may incidentally violate other WTO obligations if they are “apt to contribute materially to the policy The WTO and Climate Finance 249 goal at issue.” Importantly, the contribution of the environmental measure to the policy goal does not need to be immediately observable. As the AB noted, “it may prove difficult to isolate the contribution to public health or environmental objectives of one specific measure from those attributable to the other measures that are part of the same comprehensive programme .” This is very relevant as climate change is a global phenomenon, and the contribution of any single domestic climate change mitigation measure to global mitigation will be very difficult to establish. An important unresolved issue is the extent to which the environment exception of Article XX can be invoked against violations of WTO provisions other than those of the GATT (for instance, to the provisions...