Abstract
This article examines the GATT-legality of BTAs for carbon taxes and BAs for the cost of emissions permits. At least six primary questions (and many subsidiary ones) arise: (1) whether the border tax adjustments that convert an origin-based carbon tax to a destination-based tax are consistent with the basic rules governing international trade, (2) if not, whether an exception might be granted under Article XX of the GATT, (3) whether the conclusions regarding BTAs for carbon taxes would be valid for BAs for the cost of emissions permits that are purchased from governments, (4) whether free allocation of allowances (the analog of inframarginal exemptions from carbon taxes) would undermine the case for BAs, (5) whether BAs would be allowed for permits bought on the secondary market, and (6) whether they would be allowed for costs incurred in sequestration of CO2 or under the Clean Development Mechanism (CDM). The next Section explains the relevant GATT and ASCM rules and discusses some preliminary matters. Sections III and IV, which constitute the heart of the article, address the first two of the issues raised above. Section V considers the other four, albeit in considerably less detail. Section VI summarizes and concludes. Sections III and IV, being concerned with border adjustments for carbon taxes, generally refer to BTAs, even though more generic references to BAs might be appropriate in some cases.
Recommended Citation
McLure, Charles E. Jr.
(2011)
"The GATT-Legality of Border Adjustments for Carbon Taxes and the Cost of Emissions Permits: A Riddle, Wrapped in a Mystery, Inside an Enigma,"
Florida Tax Review: Vol. 11:
No.
1, Article 5.
Available at:
https://scholarship.law.ufl.edu/ftr/vol11/iss1/5