Inderscience Publishers

Frontiers in trade: the clean development mechanism and the general agreement on trade in services

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By authorising investment, technology transfer, project development and emissions trading between developed and developing countries, the Kyoto Protocol's Clean Development Mechanism (CDM) will present new opportunities for international trade. Projects hosted in developing countries will result in "Certified Emissions Reductions" (CERs), which may be used to assist developed countries to meet their emissions reduction targets. Because CERs will share the qualities of licenses and not products or services, they should not be subject to regulation by the WTO. However, services related to CDM project development, and financial services rendered in the CER trading system, may fall within the scope of the General Agreement on Trade in Services (the GATS). While the GATS will likely not interfere with the CDM's international rules, it could sometimes have a "chilling effect" on individual countries as they implement their domestic CDM systems. Clear CDM rules promulgated at the international level may help minimise potential conflicts.

Keywords: clean development mechanism, climate change, emissions trading, financial services, GATS, GATT, global warming, joint implementation, Kyoto Protocol, subsidies, sustainable development, trade and environment, trade disputes, World Trade Organisation

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