'Gatting' the New Climate Treaty Right: Leveraging Energy Subsidies to Promote Multilateralism

Abstract

In a previous paper, Trading Up Kyoto: A Proposal for Amending the Protocol, I argued that not only do international trade rules, specifically the operation of the World Trade Organization("WTO") agreements, hinder international climate change treaty negotiations, but also that applying exceptions to circumvent trade rules is doctrinally difficult and normatively unsettling, primarily because of WTO jurisprudence, the colorable intent of nations that are violating WTO rules in the guise of mitigating climate change, and the challenges to creating environmental exceptions to trade rules to facilitate emissions reduction. To illustrate this point, I focused on ongoing trade disputes involving a few renewable energy subsidies through which some nations are apparently seeking to reduce their emissions. I then argued that an effective climate change treaty should counteract the impact of trade and trade rules. In this Article, I argue that nations should negotiate a plan to phase out harmful subsidies, particularly fossil fuel subsidies. The idea of eliminating subsidies is not new. It has been considered an important solution to reduce greenhouse gas emissions, and one that can complement WTO rules. This Article adds another dimension to this solution, i.e. leveraging subsidies within the new climate change treaty to encourage multilateralism. Multilateralism is essential to address the leakage and competition problems arising from the non- participation of all major greenhouse gas emitters. Effective unilateral measures to counter leakage violate WTO rules. I argue that nations can counteract this problem by incorporating into the new climate change treaty a mechanism to phase out harmful subsidies in exchange for a right to provide beneficial subsidies as one policy tool that would promote climate change mitigation efforts significantly. This proposal would complement, and not replace, existing provisions; would comply with WTO rules; would mimic other international environmental treaties, notably CITES, the Basel Convention, and the Montreal Protocol, which have addressed tensions between trade and an environmental problem by incorporating trade measures within the treaty.

Keywords: subsidies, climate change, renewable energy, multilateralism, WTO, GATT, Kyoto Protocol, ASCM, Paris, UNFCCC

JEL Classification: K00, K29, K32, N7, E62