Environmentally Motivated Tax Distinctions and WTO Law

The article discusses the WTO-compatibility of a reduced VAT rate for 'environmentally friendly' products as proposed in the European Commission's Green Paper on Integrated Product Policy. It analyses certain hypothetical cases in the light of GATT Articles III and XX and the corresponding WTO jurisprudence. Furthermore, the article elaborates on the issues of 'like products', 'PPMs' and the question whether identical products can, nevertheless, be considered 'unlike'. Concerning the GATT Article XX justifications the article develops the distinction of discriminatory effect, for example a GATT Article III violation, and discriminatory intent which precludes justifications under GATT Article XX. Finally, it discusses the criticism raised in the literature of the Appellate Body's approach to GATT Article III and XX as improperly limiting the regulatory autonomy of WTO Members. The article concludes that the careful approach chosen by the Appellate Body leaves sufficient scope for WTO Members to address public policy concerns and does not expose this young legal institution to severe institutional criticism. Alternative approaches proposed in the literature lack a textual basis in GATT 1994, add to or diminish the rights and obligations of WTO Members under GATT Article XX, and would expose the Appellate Body to criticism of making instead of interpreting the law. Copyright Oxford University Press 2003, Oxford University Press.