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WTO Law Constraints on Border Tax Adjustment and Tax Credit Mechanisms to Reduce the Competitive Effects of Carbon Taxes

Author

Listed:
  • Trachtman, Joel P.

    (Fletcher School of Law and Diplomacy, Tufts University)

Abstract

It is possible to design an import border tax adjustment that would pose a reduced risk of violating World Trade Organization (WTO) law, and, in the event a violation is found, an increased likelihood of satisfying the requirements for an exception. The lowest risk of successful WTO legal challenge would be presented by a border tax adjustment (BTA) in relation to a national product-based tax that does not vary by reference to carbon intensity of production, but is set at a fixed rate for specified categories of products. A national carbon consumption tax that varies by reference to the carbon intensity of production could achieve many of the same goals as the combination of a national carbon tax on production combined with an import BTA. If the consumption tax structure is not used, then an export border tax adjustment could address the foreign market competitiveness issue, but might significantly reduce the likelihood of the related import BTA satisfying the requirements for a WTO law exception. Alternatively, it is possible to provide domestic subsidies to high-carbon industries.

Suggested Citation

  • Trachtman, Joel P., 2016. "WTO Law Constraints on Border Tax Adjustment and Tax Credit Mechanisms to Reduce the Competitive Effects of Carbon Taxes," RFF Working Paper Series dp-16-03, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-16-03
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-16-03.pdf
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    Citations

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    Cited by:

    1. Warwick J. Mckibbin & Adele C. Morris & Peter J. Wilcoxen & Weifeng Liu, 2018. "The Role Of Border Carbon Adjustments In A U.S. Carbon Tax," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-41, February.
    2. Amandine Denis-Ryan & Chris Bataille & Frank Jotzo, 2016. "Managing carbon-intensive materials in a decarbonizing world without a global price on carbon," Climate Policy, Taylor & Francis Journals, vol. 16(sup1), pages 110-128, June.
    3. Alexander Krenek & Mark Sommer & Margit Schratzenstaller, 2021. "A WTO-compatible Border Tax Adjustment for the ETS to Finance the EU Budget," WIFO Working Papers 596, WIFO.
    4. Elisabeth Christen & Bettina Meinhart & Franz Sinabell & Gerhard Streicher, 2021. "Transportkostenwahrheit im internationalen Handel," WIFO Studies, WIFO, number 67045, Juni.
    5. Sarah Dobson & G. Kent Fellows, 2017. "Big and Little Feet: A Comparison of Provincial Level Consumption- and Production-Based Emissions Footprints," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 10(23), September.
    6. Dirk Heine & Susanne Gäde, 2018. "Unilaterally removing implicit subsidies for maritime fuels," International Economics and Economic Policy, Springer, vol. 15(2), pages 523-545, April.

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