Limiting Greenhouse Gas Emissions Through Emissions Trading: An Interim Report

The H. John Heinz III Center for Science, Economics and the Environment has gathered a prominent group of policy analysts to consider how the United States might implement its Kyoto commitment, using tradable permits in tandem with other methods. The draft report of the group, entitled Limiting Greenhouse Gas Emissions Through Emissions Trading: Interim Report, examines four policy options. This Memorandum considers whether any of these options appear likely to conflict with United States international trade obligations under the newly established Uruguay Round Agreement Establishing the World Trade Organization (‘WTO Agreement’). This summary outlines the relevant law and summarizes my conclusions on the WTO issues raised by the options. The full analysis supporting those conclusions is contained in the Memorandum that follows. The principal WTO issues raised by the Interim Report are: (1) whether the product standards envisioned by Options I, III and IV provide national (non-discriminatory) treatment to foreign products; and (2) whether the grant of free permits under the cap-and-trade schemes of Options I, III and IV would comprise an ‘actionable subsidy’ under the WTO Agreement on Subsidies and Countervailing Measures (Subsidies Agreement)