Carbon pricing seeks to capture the external costs of greenhouse gas emissions and helps shift the costs to those who are responsible for the emissions. This article discusses two carbon pricing policies―carbon taxes and emissions trading mechanisms―and their potential implications under the rules of the World Trade Organization. The article focuses on the border adjustment of these two policies. It first examines the WTO-consistency of applying carbon taxes on imports and of extending the emissions trading mechanism to imports. The article next considers the WTO-consistency of excluding exports from carbon taxes or emissions trading mechanisms, or of reimbursing exporters for the carbon taxes or the costs of emissions allowances. The article then reviews discussions on trade and climate change in the WTO.
Keywords : carbon pricing, carbon taxes, emissions trading mechanisms, border adjustment, Committee on Trade and Environment
