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The U.S. proposed carbon tariffs, WTO scrutiny and China’s responses

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  • ZhongXiang Zhang

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Abstract

With countries from around the world set to meet in Copenhagen to try to hammer out a post-2012 climate change agreement, no one would disagree that a U.S. commitment to cut greenhouse gas emissions is essential to such a global pact. However, despite U.S. president Obama’s recent announcement to push for a commitment to cut U.S. greenhouse gas emissions by 17% by 2020, in reality it is questionable whether U.S. Congress will agree to specific emissions cuts, although they are not ambitious at all from the perspectives of both the EU and developing countries, without the imposition of carbon tariffs on Chinese products to the U.S. market, even given China’s own recent announcement to voluntarily seek to reduce its carbon intensity by 40-45% over the same period. This dilemma is partly attributed to flaws in current international climate negotiations, which have been focused on commitments on the two targeted dates of 2020 and 2050. However, if the international climate change negotiations continue on their current course without extending the commitment period to 2030, which would really open the possibility for the U.S. and China to make the commitments that each wants from the other, the inclusion of border carbon adjustment measures seems essential to secure passage of any U.S. legislation capping its own greenhouse gas emissions. Moreover, the joint WTO-UNEP report indicates that border carbon adjustment measures might be allowed under the existing WTO rules, depending on their specific design features and the specific conditions for implementing them. Against this background, this paper argues that, on the U.S. side, there is a need to minimize the potential conflicts with WTO provisions in designing such border carbon adjustment measures. The U.S. also needs to explore, with its trading partners, cooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at the international level. Moreover, to in
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Suggested Citation

  • ZhongXiang Zhang, 2010. "The U.S. proposed carbon tariffs, WTO scrutiny and China’s responses," International Economics and Economic Policy, Springer, vol. 7(2), pages 203-225, August.
  • Handle: RePEc:kap:iecepo:v:7:y:2010:i:2:p:203-225 DOI: 10.1007/s10368-010-0166-8
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    References listed on IDEAS

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    1. ZhongXiang Zhang & Lucas Assunao, 2004. "Domestic Climate Policies and the WTO," The World Economy, Wiley Blackwell, vol. 27(3), pages 359-386, March.
    2. ZhongXiang Zhang, 2003. "Open Trade with the U.S. without Compromising Canada’s Ability to Comply with its Kyoto Target," Working Papers 2003.68, Fondazione Eni Enrico Mattei.
    3. Zhongxiang Zhang, 2007. "Why has China not embraced a global cap-and-trade regime?," Climate Policy, Taylor & Francis Journals, pages 166-170.
    4. ZhongXiang Zhang, 1998. "The Economics of Energy Policy in China," Books, Edward Elgar Publishing, number 1291, September.
    5. ZhongXiang Zhang, 2010. "Copenhagen and Beyond: Reflections on China's Stance and Responses," Economics Study Area Working Papers 111, East-West Center, Economics Study Area.
    6. Zhang, ZhongXiang, 2000. "Can China afford to commit itself an emissions cap? An economic and political analysis," Energy Economics, Elsevier, vol. 22(6), pages 587-614, December.
    7. Zhang, ZhongXiang, 2009. "Multilateral trade measures in a post-2012 climate change regime? What can be taken from the Montreal Protocol and the WTO?," Energy Policy, Elsevier, vol. 37(12), pages 5105-5112, December.
    8. Zhang, ZhongXiang, 2008. "Asian energy and environmental policy: Promoting growth while preserving the environment," Energy Policy, Elsevier, vol. 36(10), pages 3905-3924, October.
    9. Zhang, ZhongXiang, 2010. "Is it fair to treat China as a Christmas tree to hang everybody's complaints? Putting its own energy saving into perspective," Energy Economics, Elsevier, vol. 32(Supplemen), pages 47-56, September.
    10. Xavier Labandeira and Jose M. Martin-Moreno, 2009. "Climate Change Policies After 2012," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    11. Trevor Houser & Rob Bradley & Britt Childs, 2008. "Leveling the Carbon Playing Field: International Competition and US Climate Policy Design," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4204.
    12. Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Discussion Papers dp-97-18-rev, Resources For the Future.
    13. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
    14. Bhagwati, Jagdish & Mavroidis, Petros C., 2007. "Is action against US exports for failure to sign Kyoto Protocol WTO-legal?," World Trade Review, Cambridge University Press, vol. 6(02), pages 299-310, July.
    15. Zhang, ZhongXiang, 1998. "Greenhouse gas emissions trading and the world trading system," MPRA Paper 12971, University Library of Munich, Germany.
    16. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October.
    17. Zhang, Zhong Xiang, 1999. "Should the rules of allocating emissions permits be harmonised?," Ecological Economics, Elsevier, vol. 31(1), pages 11-18, October.
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    Citations

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    Cited by:

    1. Tianshu Chu & Thomas J. Prusa, 2005. "The Reasons For And The Impact Of Antidumping Protection: The Case Of People'S Republic Of China," World Scientific Book Chapters,in: Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 16, pages 411-433 World Scientific Publishing Co. Pte. Ltd..
    2. ZhongXiang Zhang, 2011. "Trade in Environmental Goods, with Focus on Climate-Friendly Goods and Technologies," Economics Study Area Working Papers 120, East-West Center, Economics Study Area.
    3. Bao, Qin & Tang, Ling & Zhang, ZhongXiang & Wang, Shouyang, 2013. "Impacts of border carbon adjustments on China's sectoral emissions: Simulations with a dynamic computable general equilibrium model," China Economic Review, Elsevier, pages 77-94.
    4. Junko Mochizuki & ZhongXiang Zhang, 2011. "Environmental Security and its Implications for China’s Foreign Relations," Economics Study Area Working Papers 116, East-West Center, Economics Study Area.
    5. Grant Ferrier, 2010. "The evolution of the environmental industry in the post-NAFTA era in Mexico," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 10(2), pages 147-164, June.
    6. ZhongXiang Zhang, 2012. "Who should bear the cost of China’s carbon emissions embodied in goods for exports?," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, pages 103-117.
    7. ZhongXiang Zhang, 2010. "Assessing China's Carbon Intensity Pledge for 2020: Stringency and Credibility Issues and Their Implications," Economics Study Area Working Papers 113, East-West Center, Economics Study Area.
    8. ZhongXiang Zhang, 2010. "Copenhagen and Beyond: Reflections on China’s Stance and," Chapters,in: Climate Change Policies, chapter 11 Edward Elgar Publishing.
    9. Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2015. "Carbon-based border tax adjustments and China’s international trade: analysis based on a dynamic computable general equilibrium model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 329-360, April.
    10. Zhang, ZhongXiang, 2010. "China in the transition to a low-carbon economy," Energy Policy, Elsevier, vol. 38(11), pages 6638-6653, November.
    11. Monjon, Stéphanie & Quirion, Philippe, 2010. "How to design a border adjustment for the European Union Emissions Trading System?," Energy Policy, Elsevier, vol. 38(9), pages 5199-5207, September.
    12. Zhongxiang Zhang, 2011. "In what format and under what timeframe would China take on climate commitments? A roadmap to 2050," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 11(3), pages 245-259, September.
    13. ZhongXiang Zhang, 2013. "Trade in environmental goods, with focus on climate-friendly goods and technologies," Chapters,in: Research Handbook on Environment, Health and the WTO, chapter 19, pages 673-699 Edward Elgar Publishing.
    14. ZhongXiang Zhang, 2013. "Trade in environmental goods, with focus on climate-friendly goods and technologies," Chapters,in: Research Handbook on Environment, Health and the WTO, chapter 19, pages 673-699 Edward Elgar Publishing.
    15. ZhongXiang Zhang, 2011. "Assessing China’s carbon intensity pledge for 2020: stringency and credibility issues and their implications," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(3), pages 219-235, September.
    16. ZhongXiang Zhang, 2015. "Energy and climate economics and policy," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 179-183, April.
    17. Junko Mochizuki & ZhongXiang Zhang, 2011. "Environmental Security and its Implications for China’s Foreign Relations," Economics Study Area Working Papers 116, East-West Center, Economics Study Area.

    More about this item

    Keywords

    Post-2012 climate negotiations; Border carbon adjustments; Carbon tariffs; Emissions allowance requirements; Cap-and-trade regime; Lieberman-Warner bill; Waxman-Markey bill; World trade organization; Kyoto protocol; China; United States; F18; Q48; Q54; Q56; Q58;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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