Panel 1B: The Pros and Cons of Supply Chain Standards in the Trade of Energy Goods and Services

Séance 1B: Les avantages et les inconvénients des norms de la chaîne d'approvisionnement dans le commerce des marchandises et services énergétiques

November 13, 2014

The topic of the regulation of global energy trade is a very complex topic that involves many different challenges. The panel will focus on the carbon tariffs, how to implement them and the pros and cons of such an implementation.

The first speaker, Anna Marhold, is a PHD student working for the Department of Law at the European University Institute. She decided to focus on the legal framework that could be built around the carbon tariffs, especially inside or through the WTO. The conventions concerning the energy trade form actually a patchwork of agreement. Apart from the dispersion of the agreements which do not allow an effective approach of those issues, we face several different main challenges namely the necessity of balancing the will of the countries that have the resources to make the most of it and the needs of the other countries and their population. The objective of the WTO is to promote free trade, but concerning the resources its role is sometimes limited by the nature of the subject. The WTO is a trade instrument, it will probably not solve the problem completely by itself but it can contribute to the solution. Three scenarios are possible to this end: agreeing on very specialized treaties on energy trade using WTO as a way to reunite as many members as possible, extending to collaborations of the WTO and building bridges between the different entities that could work together and offer, inside the WTO, a more precise treaty that the most committed members could choose to sign.

The second intervention, by Liz Whitsitt, focus on the types of measures that can be taken around the idea of carbon tariffs and how they can be accepted by the WTO. Governments dispose of a variety of policies to address the problem of regulation of energy notably the carbon tariffs, which is defined as a charge on imported goods and the production of carbon by those goods. Several issues can be raised concerning those, as the necessity to put an equalisation on domestic and imported goods. To determine if a measure decided by a country is acceptable in the framework of the WTO, it has to pass a double test. Firstly is raised the question of knowing if the measure is justified. Concerning that point, the carbon tariffs may enter the three criteria used by the organisation in Pr. Whitsitt’s opinion. If the answer is affirmative for the first test, the WTO will then check if the measure fits under the “chapeau” compliance. The answer to that test would be hard to predict without any specific tariff to discuss. The leading case in this field says that it would not be considered to be fair if the country does not at least enter negotiations in good faith and take the circumstances of the trading partner into account. To conclude it can be said that governments dispose of room inside the frame of the WTO to implement measures to accomplish their environmental goals.

The third speaker, James Coleman, will review the Cons of implementing carbon tariffs. If the idea behind carbon tariffs is quite simple, the concrete implementation of those tariffs is a very problematic issue on two main points: it is needed, first, to calculate the production of carbon and, second, to estimate what the tax should have been in the context of the producing country. The only close example of the implementation of such a mechanism is the Californian fuel tax. This example shows all the complexity of the calculation problem. The regulation issue is complex too, it faces problems such as equalisation: can we apply the same tax to developing country and developed countries? We can finally ask ourselves if trade wars are necessarily a bad thing or if it could lead to cooperation and if more efficient solutions could be found outside of carbon tariffs.

The Pros of unilateral state actions will be approach by the last speaker, Sharon Masher. Climate change is the definite challenge of our age and the study of the tools available to achieve the goal of reducing climate change is central. One of them is through trade agreements. How do climate change and trade fit together? The Kyoto protocol emphasized the importance of trade measures. Contrary to what has been done until today, we should use the framework of the WTO to impose environmental trade measures worldwide as it is done in other matter than environment. Several signs show that we could start and talk more about the carbon tariffs namely. The principle objection on the possibility to impose carbon tariffs is the deviation of the international principle “common but different”, and redistributing the burden of climate change on developing countries fro example, but as we are aware of that danger, it can be avoided.